Incentives to underprice
Camp, Graeme , Comer, Aimee , & How, Janice C. Y. (2006) Incentives to underprice. Accounting and Finance, 46(4), pp. 537-551.
an initial public offering, the choices made by issuers, such as the offer price, might not appear to be wealth maximizing. In this article, we argue that the choices are strategic. Based on the model developed by Barry (1989), we show that the average change in the issuer's wealth (4.52 per cent) is lower than the average loss implied by underpricing (12.09 per cent). Our results support the notion that the choices issuers make at the offering generate a compensatory benefit in the aftermarket. That the issuer may well not suffer a net wealth loss from the offering is in accordance with continued initial public offering activity.
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|Item Type:||Journal Article|
|Keywords:||wealth, asset management, going public (Securities), finance, personal, capital losses, money, consumer lending, portfolio management|
|Subjects:||Australian and New Zealand Standard Research Classification > ECONOMICS (140000) > APPLIED ECONOMICS (140200) > Financial Economics (140207)|
|Divisions:||Current > QUT Faculties and Divisions > QUT Business School|
Current > Schools > School of Economics & Finance
|Deposited On:||15 Apr 2010 15:14|
|Last Modified:||29 Feb 2012 23:43|
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