Why Does IPO Volume Fluctuate so Much?

49 Pages Posted: 31 May 2005 Last revised: 16 Aug 2023

See all articles by Michelle Lowry

Michelle Lowry

Drexel University; European Corporate Governance Institute (ECGI)


IPO volume fluctuates substantially over time. This paper compares the extent to which the aggregate capital demands of private firms, the adverse-selection costs of issuing equity, and the level of investor optimism can explain these fluctuations. Empirical tests include both aggregate and industry-level time-series regressions using proxies for the above factors and an analysis of the relation between post-IPO stock returns and IPO volume. Results indicate that firms' demands for capital and investor sentiment are important determinants of IPO volume, in both statistical and economic terms. Adverse-selection costs are also statistically significant, but their economic effect appears small.

Keywords: IPO, capital demands, information asymmetry, investor sentiment

JEL Classification: G32

Suggested Citation

Lowry, Michelle B., Why Does IPO Volume Fluctuate so Much?. Journal of Financial Economics (JFE), Vol. 67, pp. 3-40, 2003, Available at SSRN: https://ssrn.com/abstract=729963

Michelle B. Lowry (Contact Author)

Drexel University ( email )

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European Corporate Governance Institute (ECGI) ( email )

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