Incentives to underprice
In an initial public offering, the choices made by issuers, such as the offer price, might not appear to be wealth maximizing. In this article, we argue that the choices are strategic. Based on the model developed by Barry (1989), we show that the average change in the issuer's wealth (4.52 per cent) is lower than the average loss implied by underpricing (12.09 per cent). Our results support the notion that the choices issuers make at the offering generate a compensatory benefit in the aftermarket. That the issuer may well not suffer a "net" wealth loss from the offering is in accordance with continued initial public offering activity. Copyright (c) The Authors Journal compilation (c) 2006 AFAANZ.
Year of publication: |
2006
|
---|---|
Authors: | Camp, Graeme ; Comer, Aimee ; How, Janice C. Y. |
Published in: |
Accounting and Finance. - Accounting and Finance Association of Australia and New Zealand - AFAANZ, ISSN 0810-5391. - Vol. 46.2006, 4, p. 537-551
|
Publisher: |
Accounting and Finance Association of Australia and New Zealand - AFAANZ |
Saved in:
freely available
Saved in favorites
Similar items by person
-
Camp, Graeme, (2006)
-
Camp, Graeme, (2000)
-
Camp, Graeme, (2000)
- More ...