Leaders and followers in hot IPO markets

Shantanu Banerjee; Ufuk Gucbilmez; Grzegorz Pawlina

doi:10.1016/j.jcorpfin.2016.01.004

Leaders and followers in hot IPO markets

Shantanu Banerjee, Ufuk Gucbilmez, Grzegorz Pawlina

Research output: Contribution to journal › Article › peer-review

Abstract

We model the dynamics of going public within an IPO wave. The model predicts that firms with better growth opportunities can find it optimal to go public early and accept underpricing of their issues to signal quality. Data supports this prediction as, on average, early movers underprice their issues significantly more and we show that leaders (early movers with high underpricing) obtain much higher valuations when going public than other IPO firms. Furthermore, after going public, leaders invest significantly more, their sales grow faster, and their profitability remains higher compared to other IPO firms.

Original language	English
Pages (from-to)	309-334
Journal	Journal of Corporate Finance
Volume	37
Early online date	19 Jan 2016
DOIs	https://doi.org/10.1016/j.jcorpfin.2016.01.004
Publication status	Published - 30 Apr 2016

Keywords / Materials (for Non-textual outputs)

IPO cyles
underpricing
adverse selection
signaling

Access to Document

10.1016/j.jcorpfin.2016.01.004

Gucbilmez-etal-JCF-2016-leaders-followers-hot-IPO-markets.pdfAccepted author manuscript, 1.43 MB

http://ssrn.com/abstract=2020221

Frontiers of Finance 2012 Conference
Ufuk Gucbilmez (Speaker)
13 Sept 2012 → 15 Sept 2012
Activity: Participating in or organising an event types › Participation in conference
21st Annual Meeting of the European Financial Management Association
Ufuk Gucbilmez (Speaker)
27 Jun 2012 → 30 Jun 2012
Activity: Participating in or organising an event types › Participation in conference
19th Annual Conference of the Multinational Finance Society
Ufuk Gucbilmez (Speaker)
24 Jun 2012 → 27 Jun 2012
Activity: Participating in or organising an event types › Participation in conference

Cite this

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title = "Leaders and followers in hot IPO markets",

abstract = "We model the dynamics of going public within an IPO wave. The model predicts that firms with better growth opportunities can find it optimal to go public early and accept underpricing of their issues to signal quality. Data supports this prediction as, on average, early movers underprice their issues significantly more and we show that leaders (early movers with high underpricing) obtain much higher valuations when going public than other IPO firms. Furthermore, after going public, leaders invest significantly more, their sales grow faster, and their profitability remains higher compared to other IPO firms.",

keywords = "IPO cyles, underpricing, adverse selection, signaling",

author = "Shantanu Banerjee and Ufuk Gucbilmez and Grzegorz Pawlina",

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language = "English",

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AU - Banerjee, Shantanu

AU - Gucbilmez, Ufuk

AU - Pawlina, Grzegorz

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N2 - We model the dynamics of going public within an IPO wave. The model predicts that firms with better growth opportunities can find it optimal to go public early and accept underpricing of their issues to signal quality. Data supports this prediction as, on average, early movers underprice their issues significantly more and we show that leaders (early movers with high underpricing) obtain much higher valuations when going public than other IPO firms. Furthermore, after going public, leaders invest significantly more, their sales grow faster, and their profitability remains higher compared to other IPO firms.

AB - We model the dynamics of going public within an IPO wave. The model predicts that firms with better growth opportunities can find it optimal to go public early and accept underpricing of their issues to signal quality. Data supports this prediction as, on average, early movers underprice their issues significantly more and we show that leaders (early movers with high underpricing) obtain much higher valuations when going public than other IPO firms. Furthermore, after going public, leaders invest significantly more, their sales grow faster, and their profitability remains higher compared to other IPO firms.

KW - IPO cyles

KW - underpricing

KW - adverse selection

KW - signaling

U2 - 10.1016/j.jcorpfin.2016.01.004

DO - 10.1016/j.jcorpfin.2016.01.004

M3 - Article

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SP - 309

EP - 334

JO - Journal of Corporate Finance

JF - Journal of Corporate Finance

ER -

Leaders and followers in hot IPO markets

Abstract

Keywords / Materials (for Non-textual outputs)

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Activities

Frontiers of Finance 2012 Conference

21st Annual Meeting of the European Financial Management Association

19th Annual Conference of the Multinational Finance Society

Cite this