Economics at your fingertips  

Clustering of Initial Public Offerings, Information Revelation and Underpricing

Ulrike Hoffmann-Burchardi

FMG Discussion Papers from Financial Markets Group

Abstract: By providing an analysis of sequential going-public decisions the paper outlines conditions under which the likelihood of a second initial public offering increases after a first firm has gone public. Two effects can trigger the rise of hot issue markets in a setting with asymmetric and costly information about both firm quality and industry prospects. The risk-averse entrepreneur can be subject to risk-induced selling pressure because of uncertain industry prospects conveyed by a first IPO in the industry. Also, investors can free-ride on the industry news, and increase their valuation for a second firm by abstaining from further costly information production. Finally, the model offers and explanation for the empirical finding that hot issue markets exhibit a higher degree of underpricing than cold issue markets.

Date: 1999-02
References: Add references at CitEc

Downloads: (external link) (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this paper

More papers in FMG Discussion Papers from Financial Markets Group
Bibliographic data for series maintained by The FMG Administration ().

Page updated 2024-07-23
Handle: RePEc:fmg:fmgdps:dp316