Initial public offering underpricing : 1990s vs. 1980s
Investing in Initial Public Offerings, or IPOs, was one of the best know ways for many investors to get rich in the late 1990s. An IPO is the first offering of shares by a firm to the public. As a privately held firm expands, it may need more funds than it can obtain through borrowing and therefore will consider an IPO. The pricing of IPOs has received a great deal of attention by many researchers, especially underpricing. Underpricing is the price change measured from the offering price to the market price on the first trading day. Underpricing may reduce the dollar capital that the company will receive for its IPO, but will increase profits of the initial investors and the investment bankers. In this study, I examined why there was higher underpricing in the 1990s compared to the 1980s. I also examined if the factors: higher trading volume, higher growth and higher number of high tech companies contributed to more underpricing in the I 990s compared to the 1980s. I did not find significant statistical evidence to support why there was more underpricing in the 1990s compared to the1980s. In fact, for my sample I do not find significantly higher underpricing for the l 990s firms compared to the 1980s firms. However, I did find that many of my hypothesized determinants did affect the degree of under-pricing. For example, I found that firms with higher average trading volume and higher average first year returns were more underpriced. In addition, I found that high tech firms were more underpriced
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Bachelor of Science (B.S.)
College of Business Administration
Business Administration -- Dissertations, Academic;Dissertations, Academic -- Business Administration;Going public (Securities);Stocks -- Prices
Length of Campus-only Access
Honors in the Major Thesis
Reeder, Arnold Sietse, "Initial public offering underpricing : 1990s vs. 1980s" (2003). HIM 1990-2015. 340.