Asymmetric Information, Dynamic Information Production and Initial Public Offerings

2009 ◽  
Author(s):  
Rafiqul Bhuyan Rafiq ◽  
Coskun Cetin
Keyword(s):  
Asymmetric Information ◽  
Initial Public Offerings ◽  
Information Production ◽  
Dynamic Information ◽  
Public Offerings ◽  
Information Dynamic

scholarly journals The Venture Capital Certification Role In Initial Public Offerings

2016 ◽  
Vol 32 (2) ◽  
pp. 479 ◽  
Author(s):  
Tarek Miloud
Keyword(s):  
Asymmetric Information ◽  
Venture Capital ◽  
Information Asymmetry ◽  
Initial Public Offerings ◽  
High Frequency ◽  
Price Volatility ◽  
Price Difference ◽  
Public Offerings ◽  
North American Market ◽  
The Cost

Using high frequency Euronext Paris data, the paper examines the market microstructure trading characteristics of venture backed initial public offerings (IPOs) in the French market. Previous North American market studies approve the role played by venture capital (VC) firms for the certification of IPOs and their role in reducing the asymmetric information between investors. The study sample is composed of IPOs realized during the period 2000–2013 both with and without VC firm involvement. The results present no significant price difference between both IPO types. The cost of asymmetric information and of price volatility is higher for the VC-backed operations. Moreover, the study shows that underpricing is positively correlated to the cost of the information asymmetry. Contrary to previous studies, the results show that the effects of VC firm certification and monitoring are not perceived by IPO investors in the French market.

Perspective on Underpricing of IPOs in Emerging Economies

2019 ◽  
Vol 18 (1_suppl) ◽  
pp. S87-S101
Author(s):  
L V Ramana
Keyword(s):  
Asymmetric Information ◽  
Emerging Markets ◽  
Initial Public Offerings ◽  
Emerging Economies ◽  
Important Determinant ◽  
The State ◽  
Secondary Market ◽  
Top Management ◽  
Public Offerings ◽  
Jel Classifications

Pricing of initial public offerings (IPOs) has received considerable attention from the perspective of asymmetric information theories, among others. Specific aspects of emerging markets have been incorporated into models to explain the varying degrees of underpricing. Using three features that are deemed to be important for such economies, that is, principal–principal conflicts, disclosure norms and legitimacy of the top management, and two different classes of investors, institutional and retail, two frameworks have been designed to explain the expected levels of underpricing under various pair-wise combinations of these parameters. The state of the secondary market, which is an important determinant of the decision to go public, is incorporated into the framework. JEL Classifications: G3, G14, G15, G18

scholarly journals Asymmetric Information in the Market for IPOs

2019 ◽  
Vol 7 (3) ◽  
pp. 01-19
Author(s):  
Heather N Rhodes
Keyword(s):  
Asymmetric Information ◽  
Moral Hazard ◽  
Initial Public Offerings ◽  
Wealth Effect ◽  
Matched Sample ◽  
Going Public ◽  
Public Offerings ◽  
Sarbanes Oxley ◽  
The Difference ◽  
Selection Of

This study utilizes hand-collected ownership data to re-examine the signaling, agency and wealth effect theories in a matched-sample of initial public offerings (IPOs) issued in the U.S. prior to and following the passage of the Sarbanes-Oxley Act of 2002 (SOX). SOX provides some motivation for revisiting these topics because evidence exists that it may have affected the types of firms going public and ultimately the relatively importance of adverse selection and moral hazard, the asymmetric information problems with which these theories are concerned. Results on both the pre- and post-SOX samples are consistent with the signaling theory and evidence of a wealth effect exists in both eras. However, in contrast to results of studies conducted prior to SOX, both the pre- and post-SOX results give little credence to the agency theory, suggesting that SOX has not impacted investors’ concerns regarding moral hazard. Rather, the difference between the pre-SOX results and the results of previous studies suggests that SOX appeared to reduce moral hazard concerns only through its effect on the self-selection of firms going public.

scholarly journals Reducing asymmetric information in venture capital backed IPOs

2016 ◽  
Vol 42 (6) ◽  
pp. 553-568 ◽  
Author(s):  
Diego Escobari ◽  
Alejandro Serrano
Keyword(s):  
Asymmetric Information ◽  
Venture Capital ◽  
Initial Public Offerings ◽  
Capital Expenditures ◽  
Group Affiliation ◽  
Specific Group ◽  
Content Type ◽  
Public Offerings ◽  
Tangible Assets ◽  
Practical Implications

Purpose – The purpose of this paper is to model asymmetric information and study the profitability of venture capital (VC) backed initial public offerings (IPOs). The mixtures approach endogenously separates IPOs into differentiated groups based on their returns’ determinants. The authors also analyze the factors that affect the probability that IPOs belong to a specific group. Design/methodology/approach – The authors propose a new method to model asymmetric information between investors and firms in VC backed IPOs. The approach allows the authors to identify differentiated companies under incomplete information. The authors use a sample of 2,404 US firms from 1980 through 2012 to estimate the mixture model via maximum likelihood. Findings – The authors find strong evidence that companies can be separated into two groups based on how IPO returns are determined. For companies in the first group the results are similar to previous studies. For companies in the second group the authors find that profitability is mainly affected by the reputation of the seed VC and capital expenditures. Tangible assets and age help explain group affiliation. The authors also motivate the findings for a continuum of heterogeneous IPO groups. Practical implications – The proposed mixture approach helps decrease asymmetric information for investors, regulators, and companies. Originality/value – The mixture methods help decrease asymmetric information between investors and firms improving the probability of making profitable investments. Separating between groups of IPOs is crucial because different determinants of an IPO operating performance can potentially have opposite effects for different groups.

scholarly journals Back to the Origins of the Initial Public Offerings Price Range: Underwriter-Funds Network and Information Production Timeline

2020 ◽  
Vol 12 (11) ◽  
pp. 91
Author(s):  
Camilla Mazzoli ◽  
Claudia Pigini ◽  
Sabrina Severini
Keyword(s):  
Mixture Model ◽  
Initial Public Offerings ◽  
Institutional Investors ◽  
Due Diligence ◽  
Information Production ◽  
Fair Dealing ◽  
Public Offerings ◽  
Safe Harbour ◽  
Price Range ◽  
Initial Price

Although the initial price range in U.S. Initial Public Offerings (IPOs) is constrained by SEC regulations, a non-negligible percentage of IPO price ranges falls outside the ‘safe harbour’. We investigate how the price range - which sends the very first signals on the IPO quality to the market - is set in the due diligence phase, with special attention to unexplored networking patterns between underwriters and institutional investors. By making use of a Mixture Model applied to 1,246 US firms listed between 2004 and 2016, we show that underwriters that are centrally positioned in their network of regular investors are more likely to set a price range that is compliant with SEC guidelines. We argue that the flexibility resulting from being safe harbour-compliant allows underwriters to preserve their reputation for fair dealing with issuers by exploiting a dumping ground proviso or quid pro quo agreements with their network funds. Despite information produced by network funds in the due diligence step having no significant effect on the width of the price range, in our study, we provide evidence that the range does serve as a proxy of the uncertainty of the listing firms.

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