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A Review of IPO Activity, Pricing, and Allocations

Author

Listed:
  • Jay R. Ritter

    (The University of Florida,)

  • Ivo Welch

    (Yale School of Management and the NBER)

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 is threefold: 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 nonrational and agency conflict explanations. We describe some promising such alternatives. Copyright The American Finance Association 2002.

Suggested Citation

  • Jay R. Ritter & Ivo Welch, 2002. "A Review of IPO Activity, Pricing, and Allocations," Journal of Finance, American Finance Association, vol. 57(4), pages 1795-1828, August.
  • Handle: RePEc:bla:jfinan:v:57:y:2002:i:4:p:1795-1828
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    JEL classification:

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

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