IPO Information Aggregation and Underwriter Quality

Review of Finance, Forthcoming

34 Pages Posted: 13 Aug 2009

See all articles by Wei Wang

Wei Wang

Cleveland State University

Chris Yung

University of Virginia - McIntire School of Commerce

Multiple version iconThere are 2 versions of this paper

Date Written: August 13, 2009

Abstract

A key distinction between some models of IPO pricing (e.g., auctions and bookbuilding) and others (e.g., fixed-priced models) is whether price discovery occurs in the primary or secondary market. Higher investment bank reputation is associated with 1) more active filing price revisions and 2) reduced secondary market volatility, indicating greater resolution of uncertainty before trading begins. Revisions of nonreputable banks cluster on exactly zero dollars. Finally, the 'partial adjustment' phenomenon - often attributed to information aggregation - is primarily due to the behavior of reputable underwriters. We conclude that theoretical models of primary market information aggregation are better suited for reputable underwriters.

Keywords: Initial public offerings, Underwriter quality, Information Aggregation, Preoffering

JEL Classification: G24

Suggested Citation

Wang, Wei and Yung, Chris, IPO Information Aggregation and Underwriter Quality (August 13, 2009). Review of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1448701

Wei Wang

Cleveland State University ( email )

Cleveland, OH 44115
United States

Chris Yung (Contact Author)

University of Virginia - McIntire School of Commerce ( email )

P.O. Box 400173
Charlottesville, VA 22904-4173
United States
434-242-0836 (Phone)

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