What has explained IPO underpricing?

Author: 
Date created: 
2005
Abstract: 

For the period 1998 to 2004, the average first-day return on initial public offerings of common stocks is 33%. This paper explores what has explained the IPO underpricing. Using data on 1598 firms-commitment, I find the cross-sectional distribution of one day average returns is modelled better as a mixture of three components: underwriters' reputation, industry composition and market valuation. I also examined the difference in initial average return between issues underwritten by prestigious banks and nonprestigious banks. I find, during the tech bubble period 1998-2000, the underwriters' reputation is positively related to IPO initial returns; and during the post-bubble period 2001-2003, IPOs managed by more reputable underwriters are associated with less shortrun underpricing. As time changes, underwriters' reputation is not a significant determinant of IPO initial returns. The firms industry and market valuation are consistently positively related to the IPO initial returns.

Description: 
The author has placed restrictions on the PDF copy of this thesis. The PDF is not printable nor copyable. If you would like the SFU Library to attempt to contact the author to get permission to print a copy, please email your request to summit-permissions@sfu.ca.
Language: 
English
Document type: 
Thesis
Rights: 
Copyright remains with the author
File(s): 
Department: 
Faculty of Business Administration - Simon Fraser University
Thesis type: 
Research Project (M.B.A.)
Statistics: