Searching in the Pre-IPO Market-Interaction between Private Firms and Investment Banks

Chen, Chung; Petrova, Milena; Song, Garrison Hongyu

doi:10.5430/afr.v4n4p147

Cited by 3 publications

(3 citation statements)

References 23 publications

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“…80 For papers using search models in this setting, see for instance Lagos and Rocheteau (2009) for an application in over-thecounter markets, or Chen et al (2015) for a specific application to the IPO market.…”

Section: C14 the Ipo Decisionmentioning

confidence: 99%

Macroeconomics, Firm Dynamics and IPOs

González

2020

SSRN Journal

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The Working Paper Series seeks to disseminate original research in economics and fi nance. All papers have been anonymously refereed. By publishing these papers, the Banco de España aims to contribute to economic analysis and, in particular, to knowledge of the Spanish economy and its international environment.The opinions and analyses in the Working Paper Series are the responsibility of the authors and, therefore, do not necessarily coincide with those of the Banco de España or the Eurosystem.The Banco de España disseminates its main reports and most of its publications via the Internet at the following website: http://www.bde.es.Reproduction for educational and non-commercial purposes is permitted provided that the source is acknowledged.

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Section: C14 the Ipo Decisionmentioning

confidence: 99%

Macroeconomics, Firm Dynamics and IPOs

González

2020

SSRN Journal

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“…However, there are only a few research papers from the literature on the application of search theory in the field of finance. Chen et al (2015) propose a random search-based model to explore the pre-IPO market search process between private firms and investment banks. Song and Jain (2020) set up a random search model to investigate the search and bargain process between angel investors and entrepreneurs in the very early-stage financing market.…”

Section: Introductionmentioning

confidence: 99%

Capital Mobility vs. Labor Mobility:Theory and Implications

Song

2022

IJEFI

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A random search-based model is proposed to study the impact of the relative mobility of capital with respect to labor on income inequality and financial globalization for the first time. Our simulation results indicate that capital is less mobile than labor domestically. Our simulation results further suggest the duality of capital mobility in financial globalization, in which more mobile capital may not always promote financial globalization. Lastly, our simulation results show that the share of labor income in the gross proceeds is negatively related to the relative mobility of capital, the separating rate between capital and labor, and the bargaining power of capital, which may shed light on income inequality in the U.S.

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“…Duffie et al (2002, 2005, 2007), Lagos and Rocheteau (2007) are pioneers to introduce search theory to dynamic asset markets. Chen et al (2015) set up a random search-based model to characterize the pre-IPO market matching process between private firms and investment banks to provide an alternate explanation to IPO short-run underpricing. Song and Lewison (2018) establish a search-based model to investigate the impact of the delisting risk by the stock exchange on the distressed public company’s going-private decision.…”

Section: Introductionmentioning

confidence: 99%

In search of angels: the first bucket of gold for entrepreneurs

Song

Jain

2021

SEF

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Purpose This paper aims to explore the allocation of the exit value of a start-up company in market equilibrium between an angel investor and an entrepreneur in the very early-stage financing market. Design/methodology/approach The theoretical model is established based on the two-sided random search theory and the model’s ability to match the empirical data is evaluated via simulation. Findings The model indicates that the allocation of the final investment outcome is not proportional to the initial investments by the angel investor and the entrepreneur. The simulation results show that the continued investment by the entrepreneur and the private benefit acquired by the angel investor have a more profoundly negative influence on the angel investor’s share of the exit value of the start-up company. Moreover, the market search structure represented by the matching probability of an angel investor to an entrepreneur has a more significant impact on the angel investor’s share than the other model parameters. Originality/value The importance of market search friction in the very early-stage financing market is emphasized. The concepts of continued investments and private benefits are introduced and quantified for the first time under the framework of angel investment. The impacts of such model parameters as the matching probability of an angel investor to an entrepreneur, the success rate of a start-up company, the bargaining power of an angel investor and the discount rate on the allocation of the exit value of the start-up company are investigated as well.

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Searching in the Pre-IPO Market-Interaction between Private Firms and Investment Banks

Cited by 3 publications

References 23 publications

Macroeconomics, Firm Dynamics and IPOs

Macroeconomics, Firm Dynamics and IPOs

Capital Mobility vs. Labor Mobility:Theory and Implications

In search of angels: the first bucket of gold for entrepreneurs

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