Optimal Rationing in IPOs with Risk Averse Institutional Investors

Moez Bennouri () and Sonia Falconieri ()
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Sonia Falconieri: Tilburg University

Rivista di Politica Economica, 2005, vol. 95, issue 4, 3-29

Abstract: Using a mechanism design approach, we derive endogenously the optimal IPO mechanism when institutional investors are risk averse. We show that the optimal allocation rule is such that all the institutional investors with sufficiently good information are allocated a positive quantity of shares which is increasing in the quality of the their information. Additionally, we also derive the optimal rationing scheme which is uniform, i.e. all institutional investors are rationed by the same amount of shares.

JEL-codes: D8 G2 (search for similar items in EconPapers)
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:rpo:ripoec:v:95:y:2005:i:4:p:3-29

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