Underpricing, Stabilization, and Governance
31 Pages Posted: 25 Aug 2005
Date Written: August 12, 2005
Abstract
Arugaslan, Cook, and Kieschnick (2004) challenge underpricing results obtained from conventional cross-sectional regression analysis on the grounds that standard methods fail to properly account for underwriter price stabilization and adequately capture variations in information asymmetries related to firm size. We find that results from the long-standing methods for estimating underpricing relations are robust to one's choice of size proxy. We obtain consistent estimates of underpricing determinants from censored regressions of first-day returns and from least squares regressions of longer horizon returns, whereas estimates from the mixed distribution proposed by Arugaslan et al. are sensitive to distribution assumptions and starting values.
Keywords: Initial public offerings (IPO), Underpricing, Dual class, Ownership structure, Governance, Price stabilization, Mixed distribution, Censored distribution
JEL Classification: G24, G32, G34, G38, K22, C16, C34
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Why Has IPO Underpricing Changed Over Time?
By Tim Loughran and Jay R. Ritter
-
Why Has IPO Underpricing Changed Over Time?
By Tim Loughran and Jay R. Ritter
-
A Review of IPO Activity, Pricing and Allocations
By Jay R. Ritter and Ivo Welch
-
A Review of IPO Activity, Pricing, and Allocations
By Ivo Welch and Jay R. Ritter
-
Why Don't Issuers Get Upset About Leaving Money on the Table in Ipos?
By Tim Loughran and Jay R. Ritter
-
Underpricing and Entrepreneurial Wealth Losses in Ipos: Theory and Evidence
-
Common Stock Offerings Across the Business Cycle: Theory and Evidence
By Hyuk Choe, Ronald W. Masulis, ...
-
IPO Market Cycles: Bubbles or Sequential Learning?
By Michelle Lowry and G. William Schwert
-
IPO Market Cycles: Bubbles or Sequential Learning?
By Michelle Lowry and G. William Schwert