IPO Market Timing
Year: 2005
Type: article
Abstract: I develop a model of information spillovers in initial public offerings (IPOs). The outcomes of pioneers’ IPOs reflect participating investors’ private information on common valuation factors. This makes the pricing of subsequent issues relatively easier and attracts more firms to the IPO market. I show that IPO market timing by the followers emerges as an equilibrium clustering pattern. High offer price realizations for pioneers’ IPOs better reflect investors’ private information and trigger a larger number of subsequent IPOs than low offer price realizations do. This asymmetry in the spillover effect is more pronounced early on in a hot market. The model provides an explanation for recent empirical findings that illustrate the high sensitivity of going public decision to IPO market conditions.
Source: Review of Financial Studies
DOI: 10.1093/rfs/hhi022
Author: Aydoğan Altı
Institution: The University of Texas at Austin
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2073049866