How Does Underwriter Price Support Affect IPOs? Empirical Evidence
AbstractWhile it is extensively documented that underwriters often "stabilize" or "support" initial public offerings (IPOs), less is known about how this practice impacts the IPO process. We argue that price support creates a short put position for underwriters, and thereby gives underwriters the incentive to reduce the ex-ante price risk of IPOs. We provide extensive empirical evidence that price support is related to IPO price risk, using
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Bibliographic InfoPaper provided by Yale School of Management in its series Yale School of Management Working Papers with number ysm91.
Date of creation: 01 Jun 1998
Date of revision: 01 Jul 2000
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