IPO Pricing in the Dot‐com Bubble

Ljungqvist, Alexander; Wilhelm, William J.

doi:10.1111/1540-6261.00543

Cited by 714 publications

(482 citation statements)

References 38 publications

Supporting

Mentioning

428

Contrasting

Unclassified

Order By: Relevance

“…Fifth, given that our sample period (1996 -2004) includes the "dot-com bubble" which is conventionally dated between 1996 and 2000 (Ljungqvist and Wilhelm, 2003), we rerun our regressions for the two sub-periods 1996 -2000 and 2001 -2004. As can be seen in Table A7, the coefficients on Ln(Optvol) are positive and significant (at the 1% level) in both sub-periods, which provides reassurance that our results are not driven by high coefficient magnitudes in the earlier or later period.…”

Section: Robustness Tests For the Baseline Resultsmentioning

confidence: 99%

The bright side of financial derivatives: Options trading and firm innovation

Blanco

Wehrheim

2017

Journal of Financial Economics

107

View full text Add to dashboard Cite

Do financial derivatives enhance or impede innovation? We aim to answer this question by examining the relationship between equity options markets and standard measures of firm innovation. Our baseline results show that firms with more options trading activity generate more patents and patent citations per dollar of R&D invested. We then investigate how more active options markets affect firms' innovation strategy. Our results suggest that firms with greater trading activity pursue a more creative, diverse and risky innovation strategy. We discuss potential underlying mechanisms and show that options appear to mitigate managerial career concerns that would induce managers to take actions that boost short-term performance measures. Finally, using several econometric specifications that try to account for the potential endogeneity of options trading, we argue that the positive effect of options trading on firm innovation is causal.

show abstract

Section: Robustness Tests For the Baseline Resultsmentioning

confidence: 99%

The bright side of financial derivatives: Options trading and firm innovation

Blanco

Wehrheim

2017

Journal of Financial Economics

107

View full text Add to dashboard Cite

show abstract

“…If underpricing were related to uncertainty regarding issue quality as in most rational models of IPOs, and uncertainty is higher during hot markets, one would expect increased investment by banks in information generation to mitigate this problem. Yet, Ljungqvist and Wilhelm (2003) and Corwin and Schultz (2005) document that information production per issue, as measured by the size of the underwriting syndicate, fell significantly during the 1999-2000 hot market. 2 Moreover, not only was IPO underpricing very different during this hot market, so were the characteristics of IPO firms.…”

Section: Introductionmentioning

confidence: 99%

Good IPOs Draw in Bad: Inelastic Banking Capacity and Hot Markets

2007

View full text Add to dashboard Cite

We posit that screening IPOs requires specialized labor which, in the short run, is in fixed supply. Hence, a sudden increase in demand for IPO financing increases the compensation of IPO screening labor. Increased compensation results in reduced screening which encourages sub-marginal firms to enter the IPO market, further increasing the demand for screening labor and thus its compensation. The model's conclusions are consistent with empirical findings of increased underpricing during hot markets, positive correlation between issue volume and underpricing, negative correlation between issue volume and information production, and with tipping points between hot and cold markets characterized by discontinuous jumps in volume, underpricing, and issue quality. Finally, the model makes sharp and so far untested predictions relating IPO market conditions both to the fundamental values of IPO firms and to the returns to investment banks and investment banking labor.JEL Classification Codes: G20, G24; Keywords: IPO, underpricing, labor constraint † We wish to thank Walid Busaba, Mike Fishman, Jie Gan, Jon Garfinkel, Anand Goel, Vidhan Goyal, Gerard Hoberg, Yrjo Koskinen, Erik Lie, Ji-Chai Lin, Tim Loughran, Allen Michel, Jacob Oded, Gordon Phillips, Thomas Rietz, Harley "Chip" Ryan, Jay Sa-Aadu, Paul Schultz, Ann Sherman, Mark Taranto, Xianming Zhou, seminar participants at Baruch College, Boston University, DePaul University, Louisiana State University, MIT, Michigan State University, Notre Dame University, University of Iowa, University of Maryland, University of Michigan, University of Minnesota and the University of Western Ontario, as well as the discussant and participants at the 2005 City University of Hong Kong Corporate Finance and Governance Conference for their valuable comments and suggestions. Special thanks are extended to the Editor, Matthew Spiegel, and two anonymous reviewers for very detailed and insightful comments. The second author, Thomas Noe, would also like to acknowledge the generous support and assistance of the Sloan School at MIT, where he was a visiting scholar during the period in which much of the work on the manuscript was completed. All remaining errors are ours.

show abstract

“…We control for (i) the IPO shares volatility (rIPO (30 after) ) (e.g., Lowry et al, 2010), (ii) the market volatility before the IPO (rm (60 before) ) (e.g., Cassia et al, 2004), (iii and iv) the IPO price revision (REVISION) (e.g., Ljungqvist and Wilhelm, 2003) and range (RANGE) (e.g., Hanley, 1993), (v) underwriters reputation (REPUTATION) (e.g., Megginson and Weiss, 1991), (vi) subscribers (INSTITUTIONAL) (e.g., Aggarwal et al, 2002), (vii-ix) the offer composition (PARTICIPATION RATIO and DILUITION FACTOR) (e.g., Ljungqvist and Wilhelm, 2003), and size (LN(1 + PROCEEDS)) (e.g., Cassia et al, 2004), and (x and xi) the firm age (LN(1 + FIRM AGE)) and size (LN(FIRM SIZE)) (e.g., Loughran and Ritter, 2004). [1999][2000][2001][2002][2003][2004][2005][2006][2007].…”

Section: Methodology and Definition Of Variablesmentioning

confidence: 99%

Local IPOs, local delistings, and the firm location premium

Baschieri

Carosi

Mengoli

2015

Journal of Banking & Finance

View full text Add to dashboard Cite

a b s t r a c tBorrowing a measure from ecology, we introduce a spatial dispersion index to quantify the firm traits related to firm geographic location and investigate firm exposure to local home bias and local investor risk tolerance as determinants of corporate market value. Consistent with the investor preference for local stocks, we find listed firms benefit from a location premium that increases with firm isolation and local investor wealth. IPOs and delistings are found to affect the market value of neighboring listed firms: isolated firms decrease in value when they cluster due to local IPOs while clustered firms increase in value as they become more isolated due to local delistings. Local firm clustering and risk tolerance also affect IPO underpricing. Empirical findings depict a framework where IPOs and delistings are locally jointly determined.

show abstract

IPO Pricing in the Dot‐com Bubble

Cited by 714 publications

References 38 publications

The bright side of financial derivatives: Options trading and firm innovation

The bright side of financial derivatives: Options trading and firm innovation

Good IPOs Draw in Bad: Inelastic Banking Capacity and Hot Markets

Local IPOs, local delistings, and the firm location premium

Contact Info

Product

Resources

About