The Role Of Information In IPO Underpricing: Implications From Refiling Behavior In The IPO Pricing Process

Topics:
IPO
Tags:
Finance,
Financial Planning,
Financial Services,
Investment,
IPO,
Queen
Source:
Queen's University

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Overview: This paper investigates the role of information played in pricing Initial Public Offerings (IPOs) under a unique environment provided by refiling behavior (updating a new price range after the preliminary prospectus but before the final prospectus) in the price-setting process of IPOs. The authors found extra supportive evidence to the asymmetric information theory of IPO underpricing by investigating the empirical rationales underlying the refiling behavior. The existence of refiling behavior leads to five percentage-points greater price revisions of IPOs and an increase about 10.6 percentage-points in initial returns. The lack of refiling behavior implies a decrease about 9.4 percentage-points in turnover.

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Format: PDF | Size: 264KB | Date: Aug 2005 | Pages: 55

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