Liquidity Benefits from IPO Underpricing: Ownership Dispersion or Information Effect

Bouzouita, Nesrine; Gajewski, Jean-François; Gresse, Carole

doi:10.1111/fima.12085

Cited by 25 publications

(13 citation statements)

References 81 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Both Mantecon and Poon (2009) and Bouzouita et al. (2015) show that insider ownership influences post‐IPO liquidity. Second, we include Insider Sales i , which is a dummy variable that takes the value of one if the IPO company has insider selling in the weeks following the offering, and zero otherwise.…”

Section: Data Empirical Design and Methodsmentioning

confidence: 99%

The dark side of IPOs: Examining where and who trades in the IPO secondary market

Cox

Ness

2022

Financial Management

View full text Add to dashboard Cite

We analyze the impact of trading dynamics, including fragmentation of markets, undisplayed (dark), and algorithmic trading, on liquidity formation in initial public offerings (IPOs). We find that these various trading dynamics evolve throughout the IPO secondary market and are dependent on the IPO's initial offering‐day underpricing. Higher levels of fragmentation in displayed (lit) markets and algorithmic trading improve market quality in IPOs, while higher levels of undisplayed (dark) trading harm it. Overall, we find that, with the exception of the impact of dark trading, the concerns regarding the impact of fragmented markets and algorithmic trading on IPO liquidity are mostly unwarranted.

show abstract

Section: Data Empirical Design and Methodsmentioning

confidence: 99%

The dark side of IPOs: Examining where and who trades in the IPO secondary market

Cox

Ness

2022

Financial Management

View full text Add to dashboard Cite

show abstract

“…Regarding fundamental analysis, [Bouzouita et al, 2015] suggested underpriced stocks in an IPO were more actively traded and carried lower liquidity costs. This underlined the importance of analysts' activity around IPOs not only for aftermarket prices, but also for the liquidity of the secondary market in the months following the IPO.…”

Section: Ipo Processmentioning

confidence: 99%

How research contributes to higher liquidity?

Balog¹

2022

RETP

View full text Add to dashboard Cite

Market efficiency has been in the spotlight for more than 50 years, since Fama introduced the Efficient Market Hypothesis. This is especially important from the point of view of information asymmetry, as stock market investors have information disadvantage compared to insiders which may result in higher financing costs for companies and lower IPO prices. However, a wide analyst base, the presence of local analysts and transparency decreases funding costs for the companies, which also leads to higher interest from investors in companies’ financial assets. Companies which have low research coverage face excess funding costs compared to companies with wider analyst coverage.

show abstract

“…Earlier studies suggested information asymmetry as the main factor causing mispricing of IPOs by the offering firm. (see Bouzouita, Gajewski, & Gresse, 2015;McGuinness, 2016;Naifar, 2011;Wahid et al, 2020). An example of the asymmetry theory suggests that investors misprice the offering due to incomplete information relating to the firm's specific characteristics (Wahid, Khan, et al, 2019).…”

Section: Factors Affecting Ipo Pricingmentioning

confidence: 99%

Valuing local and dual-class IPOs in the Alternative Investment Market

Wahid

Mumtaz

Mantell

2020

Estudios de Economía

View full text Add to dashboard Cite

Initial Public Offerings are, by definition, not seasoned securities. They have not been subjected to valuation by the community of investors. It is often difficult or impossible to forecast their future cash flows because most do not have a long history of publicly disclosed financial information. Consequently, valuing IPOs in any market is more difficult than valuing seasoned equities. In this paper, we address the valuation of IPOs in the Alternative Investment Market, (hereafter the AIM.) The purpose of this study is to determine the observable factors that affect valuation in the AIM. We apply OLS, LASSO regression, and Extreme Bounds Analysis (EBA) techniques on historical accounting data to test our theory of valuation. The statistical sample consists of 2,185 IPOs issued on the AIM between 1995 and 2020. Our findings suggest that the market valuation of IPOs in the AIM is systematically related to a multiplicity of factors. These include earnings per share (EPS) in the after-market, operating cash follow per share, and the percentage of shares issued to the public. The findings of the study have a practical value for investors who are interested in buying IPOs in the AIM.

show abstract

Liquidity Benefits from IPO Underpricing: Ownership Dispersion or Information Effect

Cited by 25 publications

References 81 publications

The dark side of IPOs: Examining where and who trades in the IPO secondary market

The dark side of IPOs: Examining where and who trades in the IPO secondary market

How research contributes to higher liquidity?

Valuing local and dual-class IPOs in the Alternative Investment Market

Contact Info

Product

Resources

About