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Asymmetric Information and IPO Size

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  • Miglo, Anton
  • Wu, Congsheng

Abstract

We build a model of an IPO for firms with private information about their earnings profile over time and test the model’s predictions using a complete sample of newly listed Chinese companies between 1992 and 2007. The model predicts that IPO size is positively correlated with short-term operating performance that is not directly consistent with traditional theories. It also provides an explanation for negative correlation between debt and profitability that is not consistent with standard trade-off theory or signaling theory. The empirical results provide strong support for our model.

Suggested Citation

  • Miglo, Anton & Wu, Congsheng, 2014. "Asymmetric Information and IPO Size," MPRA Paper 56550, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:56550
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    References listed on IDEAS

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    Cited by:

    1. Miglo, Anton, 2021. "A New Capital Structure Theory: The Four-Factor Model," MPRA Paper 105102, University Library of Munich, Germany.
    2. Miglo, Anton, 2020. "ICO vs. Equity Financing Under Imperfect, Complex and Asymmetric Information," MPRA Paper 99598, University Library of Munich, Germany.

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    More about this item

    Keywords

    Asymmetric information; Chinese IPOs; Offer size; Operating performance;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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