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IPO Pricing in the Dot-com Bubble

Author

Listed:
  • Alexander Ljungqvist

    (New York University Stern School of Business and the Centre for Economic Policy Research, London,)

  • William J. Wilhelm

    (Oxford University Saïd Business School and the University of Virginia McIntire School of Commerce.)

Abstract

IPO underpricing reached astronomical levels during 1999 and 2000. We show that the regime shift in initial returns and other elements of pricing behavior can be at least partially accounted for by marked changes in pre-IPO ownership structure and insider selling behavior over the period, which reduced key decision makers' incentives to control underpricing. After controlling for these changes, the difference in underpricing between 1999 and 2000 and the preceding three years is much reduced. Our results suggest that it was firm characteristics that were unique during the "dot-com bubble" and that pricing behavior followed from incentives created by these characteristics. Copyright 2003 by the American Finance Association.

Suggested Citation

  • Alexander Ljungqvist & William J. Wilhelm, 2003. "IPO Pricing in the Dot-com Bubble," Journal of Finance, American Finance Association, vol. 58(2), pages 723-752, April.
  • Handle: RePEc:bla:jfinan:v:58:y:2003:i:2:p:723-752
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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