IDEAS home Printed from https://ideas.repec.org/a/bla/jfinan/v44y1989i2p393-420.html
   My bibliography  Save this article

Signalling and the Pricing of New Issues

Author

Listed:
  • Grinblatt, Mark
  • Hwang, Chuan Yang

Abstract

This paper develops a signaling model with two signals, two attributes, and a continuum of signal levels and attribute-types to explain new issue underpricing. Both the fraction of the new issue retained by the issuer and its offering price convey to investors the unobservable "intrinsic" value of the firm and the variance of its cash flows. Many of the model's comparative statics results are novel, empirically testable, and consistent with the existing empirical evidence on new issues. In particular, the degree of underpricing, which can be inferred from observable variables, is positively related to the firm's postissue share price. Copyright 1989 by American Finance Association.

Suggested Citation

  • Grinblatt, Mark & Hwang, Chuan Yang, 1989. " Signalling and the Pricing of New Issues," Journal of Finance, American Finance Association, vol. 44(2), pages 393-420, June.
  • Handle: RePEc:bla:jfinan:v:44:y:1989:i:2:p:393-420
    as

    Download full text from publisher

    File URL: http://links.jstor.org/sici?sici=0022-1082%28198906%2944%3A2%3C393%3ASATPON%3E2.0.CO%3B2-C&origin=repec
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jfinan:v:44:y:1989:i:2:p:393-420. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley Content Delivery) or (Christopher F. Baum). General contact details of provider: http://edirc.repec.org/data/afaaaea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.