The Distribution of Information among Institutional and Retail Investors in IPOs

This study examines investor performance in IPOs using a unique database comprising 85,384 investors and 29 offerings from Finland. The evidence indicates that on average institutional investors do not obtain larger initial returns than retail investors, as the incentive to acquire information is limited by allocation rules which favour small orders. This result is in contrast to findings by Aggarwal et al . (2002), who show that institutional investors perform better in a bookbuilding environment. Within each investor category, however, large orders are associated with the best performance, suggesting that information differences figure more importantly within rather than between categories.     

The pricing of U.S. IPOs by seasoned foreign firms

We examine the pricing of U.S. initial public offerings (IPOs) by foreign firms that are already seasoned in their domestic countries. Presumably, these equity offers have less downside risk for investors than typical IPOs since domestic share prices can be used to help establish a preoffer value for the firm's equity. In spite of the presumed diminished downside risk, we find that offers by firms from countries that impose foreign ownership restrictions and capital controls are on average underpriced, experiencing an average first-day return in the United States of 12.7%. This result stems in part from the underwriter's failure to price the issue to fully reflect the postoffer premium that often arises for the U.S. shares. In contrast, offers by firms from countries without ownership restrictions have an average first-day return of 0.0%.     

Is there a pecking order? Evidence from a panel of IPO firms

We test the pecking order model of capital structure by examining the financing of firms that went public in 1983. We estimate a logit to predict external financing, and a multinomial logit to predict the type of financing using data on the IPO firms' security offerings during 1984–1992. Our results indicate that the probability of obtaining external funds is unrelated to the shortfall in internally generated funds, although firms with cash surpluses avoid external financing. Firms that access the capital markets do not follow the pecking order when choosing the type of security to offer.     

Modelling the behaviour of the new issue market

This paper analyses the time series behaviour of the initial public offering (IPO) market using an equilibrium model of demand and supply that incorporates the number of new issues, average underpricing, and general market conditions. Model predictions include the existence of serial correlation in both the number of new issues and the average level of underpricing, as well as interactions between these variables and the impact of general market conditions. The model is tested using 40 years of monthly IPO data. The empirical results are generally consistent with predictions.     

The consequences to analyst involvement in the IPO process: Evidence surrounding the JOBS Act

The JOBS Act allows certain analysts to be more involved in the IPO process, but does not relax restrictions on analyst compensation structure. We find that these analysts initiate coverage that is more optimistically biased, less accurate, and generates smaller stock market reactions. Investors purchasing shares following these initiations lose over 3% of their investment by the firm's subsequent earnings release. By contrast, issuers, analysts, and investment banks appear to benefit from this increased bias, as optimism is more positively associated with proxies for firm visibility and investment banking revenues when analysts are involved in the IPO process.     

Soft Strategic Information and IPO Underpricing

Using content analysis, we measure the impact of soft information, derived from words in initial public offering (IPO) registration documents, on IPO pricing efficiency. First, using 2,298 U.S. IPOs from 1996–2008, we find that an IPO document's strategic tone correlates positively with the stock's first-day return; more frequent usage of positive and/or less frequent usage of negative strategic words leads to more IPO underpricing. Second, we find that an IPO document's strategic tone is negatively correlated with the stock's long-run return. Together, these findings imply that investors initially misprice soft information in registration statements, which mispricing is eventually corrected. Additionally, we create new content-analysis libraries for strategic words and introduce a survey-based library creation method and word-weighting system.     

Investment performance of “environmentally-friendly” firms and their initial public offers and seasoned equity offers

We employ a sample of 748 environmentally-friendly (or “green”) firms listed on U.S. stock exchanges to extend studies of the effects of socially responsible investment (SRI) on stock investment returns and the performance of initial public offerings (IPOs) and seasoned equity offerings (SEOs). Our empirical tests document positive and statistically significant excess returns for our environmentally-friendly firms and their IPOs and SEOs, in contrast to our control IPO and SEO samples which underperform. In summary, a “green” equity premium is evident in returns calculated from a variety of benchmarks.     

新股投资实证分析

本文以2002年7月初至2003年6月底一年间在沪市首次发行上市的56只新股为样本,运用灰色关联度分析方法对影响新股初始收益率的各因素进行了分析,并对初始收益率与新股短中期收益率关系进行了研究。     

Venture Capitalists, Business Angels, and Performance of Entrepreneurial IPOs in the UK and France

Abstract:  Using a unique sample of 444 entrepreneurial IPOs in the UK and France, this paper analyses the investment patterns and the stock-market performance effects of two types of early stage investors: venture capitalists (VCs) and business angels (BAs). Extending existing research, we identify important endogeneity and institutional effects. Our findings indicate that UK IPOs have a higher retained ownership and lower participation ratio by BAs, but a lower retained ownership and participation ratio by VCs than in France. BA and VC investments are substitutes, and they are endogenously determined by a number of firm- and founder-related factors, such as founder ownership and external board 'interlocks', and underwriter reputation. UK VCs are effective third-party certifying agents who reduce underpricing in UK IPOs, whereas in French IPOs they increase it by appearing to engage in grandstanding. This certification effect is more significant in UK IPOs involving both high VC and BA ownership. Finally, underpricing increases with VC participation ratio, where the higher exit of VCs seems to increase the risk premium required by outside investors, in particular in the UK.     

Adverse selection, public information, and underpricing in IPOs

This paper generalizes the informational environment of the Rock model to address empirical evidence and conjectures that cannot be addressed within the standard model based on informed and uninformed investors such as underpricing being positively related to market returns observed prior to the IPO, the number of IPOs being positively related to market returns, underpricing being partly predictable based on public information, and the return to uninformed participation being negative overall but positively related to market returns observed prior to the IPO. Finally, the model suggests that a positive relation between market returns and underpricing need not represent an inefficiency in the pricing of IPOs.