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Does Rationing of Shares Increase Revenues in Initial Public Offerings?

Author

Listed:
  • Pio Baake

    (Humboldt University, Berlin)

  • Joerg Oechssler

    (Humboldt University, Berlin)

Abstract

We provide a new explanation for the apparent underpricing of initial public offerings applicable to large, regulated firms like telecommunications companies. Under the assumption that regulation is subject to political pressure by voters we demonstrate that it may be rational for issuers to ration investors in order to insure a broad distribution of shares in the population. At the same time we explain the common practice of bonus systems designed to prevent investors from taking profits immediately.

Suggested Citation

  • Pio Baake & Joerg Oechssler, 1998. "Does Rationing of Shares Increase Revenues in Initial Public Offerings?," Finance 9803006, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpfi:9803006
    Note: pages: 12
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    References listed on IDEAS

    as
    1. Teske, Paul E, 1991. "Rent-Seeking in the Deregulatory Environment: State Telecommunications," Public Choice, Springer, vol. 68(1-3), pages 235-243, January.
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    More about this item

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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