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Asymmetric Information and IPO Size

28 Pages Posted: 28 Feb 2014 Last revised: 18 Jan 2016

See all articles by Anton Miglo

Anton Miglo

Wilfried Laurier University Waterloo

Congsheng Wu

University of Bridgeport - School of Business

Date Written: February 26, 2014

Abstract

We build a model of an IPO for firms with private information about their earnings profile over time and test the model’s predictions using a complete sample of newly listed Chinese companies between 1992 and 2007. The model predicts that IPO size is positively correlated with short-term operating performance that is not directly consistent with traditional theories. It also provides an explanation for negative correlation between debt and profitability that is not consistent with standard trade-off theory or signaling theory. The empirical results provide strong support for our model.

Keywords: Asymmetric information, Chinese IPOs, Offer size, Operating performance

Suggested Citation

Miglo, Anton and Wu, Congsheng, Asymmetric Information and IPO Size (February 26, 2014). Available at SSRN: https://ssrn.com/abstract=2401787 or http://dx.doi.org/10.2139/ssrn.2401787

Anton Miglo (Contact Author)

Wilfried Laurier University Waterloo ( email )

Canada

Congsheng Wu

University of Bridgeport - School of Business ( email )

126 Park Avenue
Bridgeport, CT 06601
United States

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