Is Initial Public offering (IPOs) are underpriced and underperformed in the long run in the developed economy like USA, UK, Japan?
Hi Iqbal !
IPOs are underpriced to the extent of 15-16% in the US markets according to result from several studies. There are many theories explaining the reasons for IPO underpricing - the most commonly accepted ones are 1) 'information asymmetry between issuers, investment bankers & investors' ; 2) profit opportunity for investment bankers 3) issuer reputation. The following paper links may throw more light on the reasons of IPO underpricing. Although IPO underpricing is a worldwide phenomenon, studies based on IPO underpricing are generally market specific & generalisations across countries is not easy.
http://arno.uvt.nl/show.cgi?fid=135892
http://www.ipo-underpricing.com/Downloads/Birkenbeul_US%20Stocks.pdf
https://www.iwu.edu/economics/PPE08/peter.pdf
Yes, there are empirical studies proving this argument. This is the common phenomena throughout the world with few exceptions.
- Badges
- Science topic
- Similar topics
- Geoscience
- Asia
- India