Two Essays on IPO Information Revelation

Two Essays on IPO Information Revelation

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This dissertation addresses the resolution of private information in the IPO market. At the micro level, information content of IPO price is investigated. IPOs underwritten by high-quality investment banks are associated with more aggressive pre-offering price revisions and lower cross-sectional variations in aftermarket price run-up, and also more pronounced partial adjustment to private information, which suggest that high-quality underwriters engage in more effective information aggregation during in the primary market while low-quality ones do not. This indicates that the Benveniste-Spindt dynamic information acquisition model is more suitable for high-quality banks. At the macro level, a model is developed in which time-varying investment opportunities lead to time-varying adverse selection in the IPO market, which generates pro-cyclical IPO clustering in volume and underpricing. Given that the private information is revealed gradually in the secondary market, the model also predicts greater cross-sectional variation in price run-up and higher incidence of delisting for firms going public in booming markets. The above patterns are solidly observed in our U.S. IPO sample over 1973-2004.To ensure reasonably stable estimates we keep in our sample only underwriters with more than 5 offerings.9 Using the same Carter-Manaster tercile ... 9 Far fewer observations are needed to estimate second moments than first moments.

Title:Two Essays on IPO Information Revelation
Author: Wei Wang
Publisher:ProQuest - 2008

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