Published in:Fox School of Business Research Paper
Extent:
1 Online-Ressource (59 p)
Language:
English
DOI:
10.2139/ssrn.3286358
Identifier:
Origination:
Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments June 24, 2019 erstellt
Description:
Initial public offerings (IPOs) transform private firms into publicly traded ones, therebyimproving liquidity of their shares. Better liquidity increases firm value, which we call"liquidity value". We use a simple model and hypothesize that issuers and IPO in-vestors bargain over the liquidity value, resulting in a discounted offer price, i.e., IPOunderpricing. We find supporting evidence that underpricing is positively related to theexpected post-IPO liquidity of the issuer, controlling for firm and deal characteristicsand market conditions. We also explore two regulation changes as exogenous shocksto issuers' liquidity before and after IPO, respectively. With a difference-in-differencesapproach, we find that underpricing is more pronounced with better expected post-IPOliquidity or lower pre-IPO liquidity