A Review of IPO Activity, Pricing and Allocations
University of California, Los Angeles (UCLA); National Bureau of Economic Research (NBER)
Jay R. Ritter
University of Florida - Department of Finance, Insurance and Real Estate
Yale ICF Working Paper No. 02-01
We review the theory and evidence on IPO activity: why firms go public, why they reward first-day investors with considerable underpricing, and how IPOs perform in the long run. Our perspective on the literature is three-fold: First, we believe that many IPO phenomena are not stationary. Second, we believe research into share allocation issues is the most promising area of research in IPOs at the moment. Third, we argue that asymmetric information is not the primary driver of many IPO phenomena. Instead, we believe future progress in the literature will come from non-rational and agency conflict explanations. We describe some promising such alternatives.
Number of Pages in PDF File: 45
JEL Classification: G24
Date posted: January 9, 2002
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