Impact of liquidity and information on the mispricing of newly public firms

Joan Wiggenhorn () and Jeff Madura ()

Journal of Economics and Finance, 2005, vol. 29, issue 2, 203-220

Abstract: We test whether the mispricing of newly public firms is affected by liquidity and information during the quiet period, from the end of the quiet period until the lock-up expiration date, and post lock-up. Liquidity is affected by the underwriter’s stabilization efforts during the quiet period and the founder’s ability to sell shares in the post-lockup period. Based on a sample of winner and loser events for more than 2,600 newly public firms during 1992–2001, the degree of under-or overreaction is conditioned on the period within the aftermarket following the IPO. We attribute the results to different liquidity and information effects among the three periods. Copyright Springer 2005

Date: 2005
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DOI: 10.1007/BF02761554

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