IDEAS home Printed from
   My bibliography  Save this article

Reforming the US IPO market: lessons from history and theory


  • Robert Wright


The current US IPO market is inefficient and unfair. To protect their own balance sheets, US investment banks systematically underprice offerings. To ration the cheap securities, the investment banks utilize various nefarious nonprice rationing techniques, including kickbacks. Regulators should reform the market by loosening restrictions against issuers. The early history of the market (1781-1861) shows that unregulated IPO markets can function efficiently. Early US corporations successfully sold equities directly to investors without the aid of intermediaries because they could overcome information asymmetry cheaply. Today, the Information Revolution is again decreasing the cost of reducing information asymmetry between investors and issuers. Regulators could improve upon the past, however, by allowing the market to price ration new shares via an auction method.

Suggested Citation

  • Robert Wright, 2002. "Reforming the US IPO market: lessons from history and theory," Accounting History Review, Taylor & Francis Journals, vol. 12(3), pages 419-437.
  • Handle: RePEc:taf:acbsfi:v:12:y:2002:i:3:p:419-437
    DOI: 10.1080/09585200210164584

    Download full text from publisher

    File URL:
    Download Restriction: Access to full text is restricted to subscribers.

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

    References listed on IDEAS

    1. Olmstead, Alan L., 1972. "Investment Constraints and New York City Mutual Savings Bank Financing of Antebellum Development," The Journal of Economic History, Cambridge University Press, vol. 32(04), pages 811-840, December.
    2. Loughran, Tim & Ritter, Jay R, 1995. " The New Issues Puzzle," Journal of Finance, American Finance Association, vol. 50(1), pages 23-51, March.
    3. Lawrence M. Ausubel & Peter Cramton, 1997. "Auctioning Securities," Papers of Peter Cramton 98wpas, University of Maryland, Department of Economics - Peter Cramton, revised Mar 1998.
    Full references (including those not matched with items on IDEAS)


    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:taf:acbsfi:v:12:y:2002:i:3:p:419-437. 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: (Chris Longhurst). General contact details of provider: .

    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.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with 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.