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A Review of IPO Activity, Pricing, and Allocations

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Author Info
Jay Ritter
Ivo Welch

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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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Handle: RePEc:nbr:nberwo:8805

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G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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  1. Reena Aggarwal & Nagpurnanand R. Prabhala & Manju Puri, 2002. "Institutional Allocation in Initial Public Offerings: Empirical Evidence," Journal of Finance, American Finance Association, vol. 57(3), pages 1421-1442, 06. [Downloadable!] (restricted)
  2. 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 2-85, Wharton School Rodney L. White Center for Financial Research.
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  3. Beatty, Randolph P & Welch, Ivo, 1996. "Issuer Expenses and Legal Liability in Initial Public Offerings," Journal of Law & Economics, University of Chicago Press, vol. 39(2), pages 545-602, October.
  4. Amihud, Yakov & Hauser, Shmuel & Kirsh, Amir, 2003. "Allocations, adverse selection, and cascades in IPOs: Evidence from the Tel Aviv Stock Exchange," Journal of Financial Economics, Elsevier, vol. 68(1), pages 137-158, April. [Downloadable!] (restricted)
  5. Reena Aggarwal & Nagpurnanand R. Prabhala & Manju Puri, 2002. "Institutional Allocation In Initial Public Offerings: Empirical Evidence," NBER Working Papers 9070, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Reena Aggarwal, 2000. "Stabilization Activities by Underwriters after Initial Public Offerings," Journal of Finance, American Finance Association, vol. 55(3), pages 1075-1103, 06. [Downloadable!] (restricted)
  7. Barber, Brad M. & Lyon, John D., 1996. "Detecting abnormal operating performance: The empirical power and specification of test statistics," Journal of Financial Economics, Elsevier, vol. 41(3), pages 359-399, July. [Downloadable!] (restricted)
  8. Baron, David P, 1982. " A Model of the Demand for Investment Banking Advising and Distribution Services for New Issues," Journal of Finance, American Finance Association, vol. 37(4), pages 955-76, September. [Downloadable!] (restricted)
  9. Aggrawal, Reena & Prabhala, Nagpurnanand & Puri, Manju, 2002. "Institutional Allocation in Initial Public Offerings: Empirical Evidence," Research Papers 1747, Stanford University, Graduate School of Business. [Downloadable!]
  10. Malcolm Baker & Jeffrey Wurgler, 2000. "The Equity Share in New Issues and Aggregate Stock Returns," Journal of Finance, American Finance Association, vol. 55(5), pages 2219-2257, October. [Downloadable!] (restricted)
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