UK IPO Underpricing: Venture Capitalists, High-Prestige Underwriters and the Bubble Period

50 Pages Posted: 27 Feb 2005

See all articles by Leon Hadass

Leon Hadass

University of Essex

Jerry Coakley

University of Essex - Essex Business School

Andrew Wood

University of Essex - Department of Accounting, Finance & Management

Date Written: February 2005

Abstract

We analyse the short run underpricing anomaly for a unique sample of 569 IPOs on the London Stock Exchange for the period 1985-2000 and find significant differences between the 1985-1997 period and 1998-2000 bubble period. Venture capitalists played a certification role in the former period but this ceased during the bubble years. These years featured significant increases in the average IPO proceeds, money left on the table, underpricing and a decline in operating quality. Furthermore, venture capitalists increasingly used prestigious underwriters with a history of underpricing during 1998-2000 which supports the corruption hypothesis of Loughran and Ritter (2004).

Keywords: New issues puzzle, prospect theory; corruption hypothesis

JEL Classification: G24, G32

Suggested Citation

Hadass, Leon and Coakley, Jerry and Wood, Andrew, UK IPO Underpricing: Venture Capitalists, High-Prestige Underwriters and the Bubble Period (February 2005). Available at SSRN: https://ssrn.com/abstract=675101 or http://dx.doi.org/10.2139/ssrn.675101

Leon Hadass (Contact Author)

University of Essex ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

Jerry Coakley

University of Essex - Essex Business School ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom
+44 1206 872455 (Phone)
+44 1206 873429 (Fax)

HOME PAGE: http://www.essex.ac.uk/afm/staff/coakley.shtm

Andrew Wood

University of Essex - Department of Accounting, Finance & Management ( email )

Wivenhoe Park
Colchester CO4 3SQ
United Kingdom

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