How Does Underwriter Price Support Affect IPOs? Empirical Evidence
While it is extensively documented that underwriters often "stabilize" or "support" initial public offerings (IPOs), less is known about how this practice impacts the IPO process. We argue that price support creates a short put position for underwriters, and thereby gives underwriters the incentive to reduce the ex-ante price risk of IPOs. We provide extensive empirical evidence that price support is related to IPO price risk, using
|Date of creation:||01 Jun 1998|
|Date of revision:||01 Jul 2000|
|Contact details of provider:|| Web page: http://icf.som.yale.edu/|
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