Factors Affecting Secondary Share Offerings in the IPO Process

Quarterly Review of Economics and Finance, No. 49, pp. 1194-1212

38 Pages Posted: 11 Sep 2009

See all articles by Daniel P. Klein

Daniel P. Klein

Bowling Green State University

Mingsheng Li

Bowling Green State University - College of Business Administration

Date Written: April 15, 2009

Abstract

We investigate whether the sale of secondary shares in the IPO process is affected by an issuing firm’s market-timing and window-dressing activities. We find that secondary share offerings in IPOs exhibit positive autocorrelation, and the positive autocorrelation is mainly affected by the overall stock market return. Similar to the IPO wave, this finding suggests that favorable market conditions attract existing pre-IPO shareholders to sell their shares in IPOs and cause the clustering of secondary share offering in IPOs. In addition, we find that window dressing has a significant effect on both the probability of secondary share offering and the proportion of secondary shares offered in an IPO. The result is robust after controlling for firm age, industry affiliation, and other factors. Our result also indicates that the number of firms offering secondary shares in IPOs, the probability of secondary share offerings, and the proportion of secondary shares offered in IPOs are significantly lower in the internet bubble period.

Keywords: Initial public offerings, secondary share offering, market-timing, window-dressing

JEL Classification: G1, G14, G3, G39

Suggested Citation

Klein, Daniel P. and Li, Mingsheng, Factors Affecting Secondary Share Offerings in the IPO Process (April 15, 2009). Quarterly Review of Economics and Finance, No. 49, pp. 1194-1212 . Available at SSRN: https://ssrn.com/abstract=1384522

Daniel P. Klein

Bowling Green State University ( email )

Department of Psychology
Bowling Green, OH 43403
United States
Not availabe (Phone)
Not available (Fax)

Mingsheng Li (Contact Author)

Bowling Green State University - College of Business Administration ( email )

Bowling Green, OH 43403
United States

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