Are Share Price Levels Informative? Evidence from the Ownership, Pricing, Turnover and Performance of IPO Firms

Posted: 8 Mar 2004

See all articles by Chitru S. Fernando

Chitru S. Fernando

University of Oklahoma - Michael F. Price College of Business

Srinivasan Krishnamurthy

North Carolina State University - Poole College of Management

Paul A. Spindt

Tulane University - A.B. Freeman School of Business

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Abstract

We ask whether a firm's choice of IPO price is informative in the sense that it relates systematically to the firm's other choices and characteristics. We find that both institutional ownership and underwriter reputation increases monotonically with the chosen IPO price level. We also find that the relationship between IPO price and underpricing is U-shaped. In contrast, post-IPO turnover displays an inverted U-shaped relation to IPO price. Moreover, firms choosing a higher (lower) stock price level experience lower (higher) mortality rates. Our results are robust to controls for market liquidity and firm size, and for partial adjustment of IPO prices based on pre-market information.

Keywords: Share price level, stock splits, initial public offerings, ownership structure, investment banking, investor behavior

JEL Classification: G12, G14, G24, G32

Suggested Citation

Fernando, Chitru S. and Krishnamurthy, Srinivasan and Spindt, Paul A., Are Share Price Levels Informative? Evidence from the Ownership, Pricing, Turnover and Performance of IPO Firms. Journal of Financial Markets, Vol. 7, No. 4, pp. 377-403, October 2004. Available at SSRN: https://ssrn.com/abstract=515223

Chitru S. Fernando (Contact Author)

University of Oklahoma - Michael F. Price College of Business ( email )

Adams Hall
307 West Brooks Street
Norman, OK 73019-4004
United States
405-325-2906 (Phone)
405-325-7688 (Fax)

HOME PAGE: http://faculty-staff.ou.edu/F/Chitru.Fernando-1/

Srinivasan Krishnamurthy

North Carolina State University - Poole College of Management ( email )

Hillsborough Street
Raleigh, NC 27695-8614
United States

Paul A. Spindt

Tulane University - A.B. Freeman School of Business ( email )

7 McAlister Drive
New Orleans, LA 70118
United States
504-865-5413 (Phone)

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