Leaders and Followers in Hot IPO Markets

62 Pages Posted: 12 Mar 2012 Last revised: 5 Apr 2016

See all articles by Shantanu Banerjee

Shantanu Banerjee

Lancaster University - Management School

Ufuk Güçbilmez

University of Glasgow - Adam Smith Business School

Grzegorz Pawlina

Lancaster University - Department of Accounting and Finance

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

Banerjee, Shantanu and Güçbilmez, Ufuk and Pawlina, Grzegorz, Leaders and Followers in Hot IPO Markets (January 6, 2016). Journal of Corporate Finance, Vol. 37, pp. 309-334, 2016, Available at SSRN: https://ssrn.com/abstract=2020221 or http://dx.doi.org/10.2139/ssrn.2020221

Shantanu Banerjee

Lancaster University - Management School ( email )

Lancaster, Lancashire LA1 4YX
United Kingdom

Ufuk Güçbilmez (Contact Author)

University of Glasgow - Adam Smith Business School ( email )

Glasgow, Scotland
United Kingdom

Grzegorz Pawlina

Lancaster University - Department of Accounting and Finance ( email )

The Management School
Lancaster LA1 4YX
United Kingdom
+ 44 1524 592834 (Phone)
+ 44 1524 847321 (Fax)

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