A Review of IPO Activity, Pricing, and Allocations

Welch, Ivo; Ritter, Jay R.

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A Review of IPO Activity, Pricing, and Allocations

NBER Working Paper No. w8805

45 Pages Posted: 21 Feb 2002 Last revised: 23 Jan 2022

See all articles by Ivo Welch

Ivo Welch

University of California, Los Angeles (UCLA); National Bureau of Economic Research (NBER)

Jay R. Ritter

University of Florida - Department of Finance, Insurance and Real Estate

There are 3 versions of this paper

Date Written: February 2002

Abstract

We review the theory and evidence on IPO activity: why firms go public, why they reward first-day investors with considerable underpricing, and how IPOs perform in the long run. Our perspective on the literature is three-fold: First, we believe that many IPO phenomena are not stationary. Second, we believe research into share allocation issues is the most promising area of research in IPOs at the moment. Third, we argue that asymmetric information is not the primary driver of many IPO phenomena. Instead, we believe future progress in the literature will come from non-rational and agency conflict explanations. We describe some promising such alternatives.

Suggested Citation: Suggested Citation

Welch, Ivo and Ritter, Jay R., A Review of IPO Activity, Pricing, and Allocations (February 2002). NBER Working Paper No. w8805, Available at SSRN: https://ssrn.com/abstract=301426