Good IPOs Draw in Bad: Inelastic Banking Capacity and Hot Markets
AbstractWe posit that screening IPOs requires specialized labor which is in fixed supply. A sudden increase in demand for IPO financing increases the compensation of IPO screening labor. This results in reduced screening, encouraging sub-marginal firms to enter the IPO market, further fueling the demand for screening labor. The model's conclusions are consistent with empirical findings of increased underpricing during hot markets, positive correlation between issue volume and underpricing, and with tipping points between hot and cold markets. Finally, the model makes sharp predictions relating the IPO market to fundamental values of firms and to investment banking returns. The Author 2007. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please email: firstname.lastname@example.org, Oxford University Press.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Society for Financial Studies in its journal The Review of Financial Studies.
Volume (Year): 21 (2008)
Issue (Month): 5 (September)
Contact details of provider:
Postal: Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.
Web page: http://www.rfs.oupjournals.org/
More information through EDIRC
Other versions of this item:
- Naveen Khanna & Thomas H. Noe & Ramana Sonti, 2008. "Good IPOs draw in bad: Inelastic banking capacity and hot markets," OFRC Working Papers Series, Oxford Financial Research Centre 2008fe10, Oxford Financial Research Centre.
- G20 - Financial Economics - - Financial Institutions and Services - - - General
- G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Chemmanur, Thomas J. & He, Jie, 2011.
"IPO waves, product market competition, and the going public decision: Theory and evidence,"
Journal of Financial Economics, Elsevier,
Elsevier, vol. 101(2), pages 382-412, August.
- Thomas J. Chemmanur & Jie He, 2012. "IPO Waves, Product Market Competition, and the Going Public Decision: Theory and Evidence," Working Papers 12-07, Center for Economic Studies, U.S. Census Bureau.
- Bar-Isaac, Heski & Shapiro, Joel, 2013.
"Ratings quality over the business cycle,"
Journal of Financial Economics, Elsevier,
Elsevier, vol. 108(1), pages 62-78.
- Bar-Isaac, Heski & Shapiro, Joel, 2010. "Ratings Quality over the Business Cycle," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8156, C.E.P.R. Discussion Papers.
- Hertzel, Michael G. & Huson, Mark R. & Parrino, Robert, 2012. "Public market staging: The timing of capital infusions in newly public firms," Journal of Financial Economics, Elsevier, Elsevier, vol. 106(1), pages 72-90.
- Premti, Arjan & Madura, Jeff, 2013. "Motives and consequences of IPOs in cold periods," The Quarterly Review of Economics and Finance, Elsevier, Elsevier, vol. 53(4), pages 486-496.
- Boeh, Kevin & Dunbar, Craig, 2014. "IPO waves and the issuance process," Journal of Corporate Finance, Elsevier, Elsevier, vol. 25(C), pages 455-473.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.