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Does Rationing of Shares Increase Revenues in Initial Public Offerings?

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Author Info
Pio Baake (Humboldt University, Berlin)
Joerg Oechssler (Humboldt University, Berlin)

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Abstract

We provide a new explanation for the apparent underpricing of initial public offerings applicable to large, regulated firms like telecommunications companies. Under the assumption that regulation is subject to political pressure by voters we demonstrate that it may be rational for issuers to ration investors in order to insure a broad distribution of shares in the population. At the same time we explain the common practice of bonus systems designed to prevent investors from taking profits immediately.

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Publisher Info
Paper provided by EconWPA in its series Finance with number 9803006.

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Length: 12 pages
Date of creation: 24 Mar 1998
Date of revision:
Handle: RePEc:wpa:wuwpfi:9803006

Note: pages: 12
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Web page: http://129.3.20.41

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Related research
Keywords:

Find related papers by JEL classification:
G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior

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