The DOI matches its Crossref record; 1 of the 1 references it cites were found in a registry or an index.
Why Don’t Issuers Get Upset About Leaving Money on the Table in IPOs?
Open accessAbstract
One of the puzzles regarding initial public offerings (IPOs) is that issuers rarely get upset about leaving substantial amounts of money on the table, defined as the number of shares sold times the difference between the first-day closing market price and the offer price. The average IPO leaves $9.1 million on the table. This number is approximately twice as large as the fees paid to investment bankers and represents a substantial indirect cost to the issuing firm. We present a prospect theory model that focuses on the covariance of the money left on the table and wealth changes. Our reasoning also provides an explanation for a second puzzling pattern: much more money is left on the table following recent market rises than after market falls. This results in an explanation of hot issue markets. We also offer a new explanation for why IPOs are underpriced.
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Citations
Cites
Prospect Theory: An Analysis of Decision under Risk
Kahneman, D., & Tversky, A. (1979) · Econometrica · doi:10.2307/1914185 · Cited by 48,524
Cited by
Initial Public Offerings: An Analysis of Theory and Practice
BRAU, J. C., & FAWCETT, S. E. (2006) · The Journal of Finance · doi:10.1111/j.1540-6261.2006.00840.x · Cited by 837
The Information Content of IPO Prospectuses
Hanley, K. W., & Hoberg, G. (2010) · Review of Financial Studies · doi:10.1093/rfs/hhq024 · Cited by 594
Metadata
- Authors
- Loughran, T., & Ritter, J. R.
- Venue
- Review of Financial Studies
- Publisher
- Oxford University Press (OUP)
- Published
- 2002-01-02
- Volume
- 15
- Issue
- 2
- Pages
- 413-444
- ISSN
- 0893-9454 (ISSN-L)
- 1465-7368
- OpenAlex
- W3126029451
- Cited by
- 1,384
- References
- 1
- FWCI
- 91.26
- Type
- journal article
- Language
- en
- Open access
- green
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- Loughran, T., & Ritter, J. R. (2002). Why Don’t Issuers Get Upset About Leaving Money on the Table in IPOs? Review of Financial Studies. https://doi.org/10.1093/rfs/15.2.413
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Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
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