The Informational Content of Initial Public Offerings

17 Pages Posted: 18 Apr 2007

See all articles by Ian L. Gale

Ian L. Gale

Georgetown University - Department of Economics

Joseph E. Stiglitz

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Date Written: February 1990

Abstract

The ability of capital markets to distinguish firms of different value by the size of their initial equity offerings is attenuated when insiders can sell equity more than once. A model is developed in which there is price risk from holding equity between periods. When the uncertainty is small. there must be pooling in the first period. When uncertainty is large. the pooling equilibria dominate the separating equilibrium.

Suggested Citation

Gale, Ian L. and Stiglitz, Joseph E., The Informational Content of Initial Public Offerings (February 1990). NBER Working Paper No. w3259. Available at SSRN: https://ssrn.com/abstract=980905

Ian L. Gale (Contact Author)

Georgetown University - Department of Economics ( email )

Washington, DC 20057
United States
(202) 687-5732 (Phone)

Joseph E. Stiglitz

Columbia Business School - Finance and Economics ( email )

3022 Broadway
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New York, NY 10027
United States
(212) 854-0671 (Phone)
(212) 662-8474 (Fax)

HOME PAGE: http://www.josephstiglitz.com

National Bureau of Economic Research (NBER) ( email )

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Cambridge, MA 02138
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