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Initial public offerings (IPOs): The Spanish experience

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Author Info

  • Rahnema, Ahmad

    ()
    (IESE Business School)

  • Fernández, Pablo

    ()
    (IESE Business School)

Abstract

This study examines the Spanish IPOs and possible links between a firm's characteristics and the degree of mispricing. The results are consistent with those of similar studies in other countries. Data reveal that the price adjustment process of Spanish IPOs needed, on average, a longer period of time. This study provides evidence that IPOs in the Spanish market have experienced, on average, an underpricing of 11%. In addition, it is possible to reduce the degree of underpricing by selecting the optimum timing, correct underwriter, and type of placement. Handsome returns may be earned by investing in new issues, but liquidating holdings in the first 90 days after the first market price. Our results reveal a low level of efficiency for the Spanish IPO markets over the period of 1986-90.

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Bibliographic Info

Paper provided by IESE Business School in its series IESE Research Papers with number D/243.

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Length: 21 pages
Date of creation: 11 Mar 1993
Date of revision:
Handle: RePEc:ebg:iesewp:d-0243

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Postal: IESE Business School, Av Pearson 21, 08034 Barcelona, SPAIN
Web page: http://www.iese.edu/
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Keywords: Public offerings;

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References

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  1. Allen, Franklin & Faulhaber, Gerald R., 1989. "Signalling by underpricing in the IPO market," Journal of Financial Economics, Elsevier, vol. 23(2), pages 303-323, August.
  2. Brown, J Michael, 1970. "Post-Offering Experience of Companies Going Public," The Journal of Business, University of Chicago Press, vol. 43(1), pages 10-18, January.
  3. Randolph P. Beatty & Jay R. Ritter, . "Investment Banking, Reputation and the Underpricing of Initial Public Offerings," Rodney L. White Center for Financial Research Working Papers 02-85, Wharton School Rodney L. White Center for Financial Research.
  4. Barry, Christopher B. & Brown, Stephen J., 1985. "Differential Information and Security Market Equilibrium," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 20(04), pages 407-422, December.
  5. Hayne E. Leland and David H. Pyle., 1976. "Informational Asymmetries, Financial Structure, and Financial Intermediation," Research Program in Finance Working Papers 41, University of California at Berkeley.
  6. Rock, Kevin, 1986. "Why new issues are underpriced," Journal of Financial Economics, Elsevier, vol. 15(1-2), pages 187-212.
  7. Ibbotson, Roger G & Jaffe, Jeffrey F, 1975. ""Hot Issue" Markets," Journal of Finance, American Finance Association, vol. 30(4), pages 1027-42, September.
  8. Tinic, Seha M, 1988. " Anatomy of Initial Public Offerings of Common Stock," Journal of Finance, American Finance Association, vol. 43(4), pages 789-822, September.
  9. McDonald, J G & Fisher, A K, 1972. "New Issue Stock Price Behavior," Journal of Finance, American Finance Association, vol. 27(1), pages 97-102, March.
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