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A Theory of IPO Waves

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  • Ping He

Abstract

In the IPO market, investors coordinate on acceptable IPO price based on the performance of past IPOs, and this generates an incentive for investment banks to produce information about IPO firms. In hot periods, the information produced by investment banks improves the quality of IPO firms, and this allows ex ante low quality firms to go public and increases the secondary market price, thus synchronizing high IPO volumes and high first day returns. When investment banks behave asymmetrically in information production, the “reputations” of investment banks are interpreted as a form of market segmentation to economize on the social cost of information production. , Oxford University Press.

Suggested Citation

  • Ping He, 2007. "A Theory of IPO Waves," The Review of Financial Studies, Society for Financial Studies, vol. 20(4), pages 983-1020.
    • Handle: RePEc:oup:rfinst:v:20:y:2007:i:4:p:983-1020
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    File URL: http://hdl.handle.net/10.1093/rfs/hhm004
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    Cited by:

    1. Baxamusa, Mufaddal & Jalal, Abu, 2018. "Industry networks and IPO waves," Journal of Banking & Finance, Elsevier, vol. 88(C), pages 129-146.
    2. Boone, Audra L. & Floros, Ioannis V. & Johnson, Shane A., 2016. "Redacting proprietary information at the initial public offering," Journal of Financial Economics, Elsevier, vol. 120(1), pages 102-123.
    3. Radu BORES & Ana-Maria HLACIUC, 2016. "The Economics And Implications Of An Intial Public Offering," EcoForum, "Stefan cel Mare" University of Suceava, Romania, Faculty of Economics and Public Administration - Economy, Business Administration and Tourism Department., vol. 5(2), pages 1-29, July.
    4. Premti, Arjan & Madura, Jeff, 2013. "Motives and consequences of IPOs in cold periods," The Quarterly Review of Economics and Finance, Elsevier, vol. 53(4), pages 486-496.
    5. Annika Veh & Markus Göbel & Rick Vogel, 2019. "Corporate reputation in management research: a review of the literature and assessment of the concept," Business Research, Springer;German Academic Association for Business Research, vol. 12(2), pages 315-353, December.
    6. Jae Hoon Min, 2020. "Information Spillover and Demand Shock Effect of the IPOs on the Stock Price of the Competitors: Evidence From the Korean Stock Market," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(5), pages 1-12, October.
    7. Le Thuy Ngoc An & Yoshiyuki Matsuura & Mohammad Ali Tareq & Nurhayati Md Issa & Norliza Che-Yahya, 2023. "Impact of Patent Signal on Firm’s Performance at IPO: An Empirical Analysis of Japanese Firms," Economies, MDPI, vol. 11(4), pages 1-22, March.

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