Does Rationing of Shares Increase Revenues in Initial Public Offerings?

Pio Baake and Jörg Oechssler

Finance from University Library of Munich, Germany

Abstract: We provide a new explanation for the apparent underpricing of initial public offerings applicable to large, regulated firms like telecommunications companies. Under the assumption that regulation is subject to political pressure by voters we demonstrate that it may be rational for issuers to ration investors in order to insure a broad distribution of shares in the population. At the same time we explain the common practice of bonus systems designed to prevent investors from taking profits immediately.

JEL-codes: D72 G24 L96 (search for similar items in EconPapers)
Pages: 12 pages
Date: 1998-03-24
Note: pages: 12
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpfi:9803006

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