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IPO Information Aggregation and Underwriter Quality

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  • Wei Wang
  • Chris Yung

Abstract

A key distinction between some models of IPO pricing (e.g., auctions and bookbuilding) and others (e.g., fixed-priced models) is whether price discovery occurs in the primary or secondary market. Higher investment bank reputation is associated with 1) more active filing price revisions and 2) reduced secondary market volatility, indicating greater resolution of uncertainty before trading begins. Revisions of nonreputable banks cluster on exactly zero dollars. Finally, the "partial adjustment" phenomenon -- often attributed to information aggregation -- is primarily due to the behavior of reputable underwriters. We conclude that theoretical models of primary market information aggregation are better suited for reputable underwriters. Copyright 2009, Oxford University Press.

Suggested Citation

  • Wei Wang & Chris Yung, 2009. "IPO Information Aggregation and Underwriter Quality," Review of Finance, European Finance Association, vol. 15(2), pages 301-325.
    • Handle: RePEc:oup:revfin:v:15:y:2009:i:2:p:301-325
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    File URL: http://hdl.handle.net/10.1093/rof/rfp021
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    Cited by:

    1. Fjesme, Sturla Lyngnes & Lv, Jin Roc & Shekhar, Chander, 2023. "The world cup in football and the US IPO market," Journal of Corporate Finance, Elsevier, vol. 80(C).
    2. Yen-Sheng Lee, 2012. "The determinants of cross-sectional liquidity in the IPO aftermarket," Applied Financial Economics, Taylor & Francis Journals, vol. 22(14), pages 1161-1173, July.

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