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Partial Adjustment to Public Information and IPO Underpricing

Published online by Cambridge University Press:  06 April 2009

Daniel J. Bradley  and
Bradford D. Jordan
Daniel J. Bradley
Affiliation:
[email protected], Clemson University, College of Business and Behavioral Science, 324B Sirrine Hall, Clemson, SC 29634
Bradford D. Jordan
Affiliation:
[email protected], University of Kentucky, Gatton College of Business and Economics, 445 Gatton Business and Economics Building, Lexington, KY 40506.
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Abstract

We examine the extent to which offer prices reflect public information for 3,325 IPOs over the period 1990–1999. We focus primarily on four variables: share overhang, file range amendments, venture capital backing, and previous issue underpricing. We show that 35%–50% of the variation in IPO underpricing can be predicted using public information known before the offer date and therefore conclude that IPO offer prices underadjust to widely available public information to a much greater extent than previously documented.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 37 , Issue 4 , December 2002 , pp. 595 - 616
Copyright
Copyright © School of Business Administration, University of Washington 2002

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