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A Review of IPO Activity, Pricing, and Allocations

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  • Jay Ritter
  • Ivo Welch

Abstract

We review the theory and evidence on IPO activity: why firms go public, why they reward first-day investors with considerable underpricing, and how IPOs perform in the long run. Our perspective on the literature is three-fold: First, we believe that many IPO phenomena are not stationary. Second, we believe research into share allocation issues is the most promising area of research in IPOs at the moment. Third, we argue that asymmetric information is not the primary driver of many IPO phenomena. Instead, we believe future progress in the literature will come from non-rational and agency conflict explanations. We describe some promising such alternatives.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8805.

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Date of creation: Feb 2002
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Publication status: published as Ritter, Jay R. and Ivo Welch. "A Review Of IPO Activity, Pricing, And Allocations," Journal of Finance, 2002, v57(4,Aug), 1795-1828.
Handle: RePEc:nbr:nberwo:8805

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