Download This PaperLeaders and Followers in Hot IPO Markets
62 Pages Posted: 12 Mar 2012 Last revised: 5 Apr 2016
Date Written: January 6, 2016
Abstract
We model the dynamics of going public within an IPO wave. The model predicts that firms with better growth opportunities can find it optimal to go public early and accept underpricing of their issues to signal quality. Data supports this prediction as, on average, early movers underprice their issues significantly more and we show that leaders (early movers with high underpricing) obtain much higher valuations when going public than other IPO firms. Furthermore, after going public, leaders invest significantly more, their sales grow faster, and their profitability remains higher compared to other IPO firms.
Keywords: IPO cycles, underpricing, adverse selection, signaling
JEL Classification: C72, D82, E32, G30, G32
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Why Has IPO Underpricing Changed Over Time?
By Tim Loughran and Jay R. Ritter
-
Why Has IPO Underpricing Changed Over Time?
By Tim Loughran and Jay R. Ritter
-
A Review of IPO Activity, Pricing and Allocations
By Jay R. Ritter and Ivo Welch
-
A Review of IPO Activity, Pricing, and Allocations
By Ivo Welch and Jay R. Ritter
-
Why Don't Issuers Get Upset About Leaving Money on the Table in Ipos?
By Tim Loughran and Jay R. Ritter
-
Underpricing and Entrepreneurial Wealth Losses in Ipos: Theory and Evidence
-
Common Stock Offerings Across the Business Cycle: Theory and Evidence
By Hyuk Choe, Ronald W. Masulis, ...
-
IPO Market Cycles: Bubbles or Sequential Learning?
By Michelle Lowry and G. William Schwert
-
IPO Market Cycles: Bubbles or Sequential Learning?
By Michelle Lowry and G. William Schwert