Working Paper: NBER ID: w8805
Authors: Jay Ritter; Ivo Welch
Abstract: We review the theory and evidence on IPO activity: why firms go public, why they reward first-day investors with considerable underpricing, and how IPOs perform in the long run. Our perspective on the literature is three-fold: First, we believe that many IPO phenomena are not stationary. Second, we believe research into share allocation issues is the most promising area of research in IPOs at the moment. Third, we argue that asymmetric information is not the primary driver of many IPO phenomena. Instead, we believe future progress in the literature will come from non-rational and agency conflict explanations. We describe some promising such alternatives.
Keywords: No keywords provided
JEL Codes: G24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| desire for capital (E22) | decision to IPO (G24) |
| IPO pricing strategies (L11) | investor behavior (G41) |
| initial public offerings (G24) | subsequent market performance (G10) |
| market sentiment (G10) | fluctuations in IPO activity (G24) |
| life cycle stage of firms (L26) | fluctuations in IPO activity (G24) |
| methodological choices (C90) | causal inferences (C20) |