CyclesIPO_JFE_Final.pdf (1.04 MB)
Cycles in the IPO market
journal contribution
posted on 2023-06-10, 02:41 authored by Chris Yung, Gonal ColakGonal Colak, Wei WangWe develop a model in which time-varying real investment opportunities lead to time-varying adverse selection in the market for IPOs. The model is consistent with several stylized facts known about the IPO market: economic expansions are associated with a dramatic increase in the number of firms going public, which is in turn positively correlated with underpricing. Adverse selection is procyclical in the sense that dispersion in unobservable quality across firms should be more pronounced during booms. Taking the premise that uncertainty is resolved (and thus private information revealed) over time, we test this hypothesis by looking at long-run abnormal returns and delisting rates. Consistent with the model, we find (a) greater cross-sectional return variance, and (b) higher incidence of delisting for hot-market IPOs.
History
Publication status
- Published
File Version
- Accepted version
Journal
Journal of Financial EconomicsISSN
0304-405XPublisher
ElsevierExternal DOI
Issue
1Volume
89Page range
192-208Department affiliated with
- Accounting and Finance Publications
Full text available
- Yes
Peer reviewed?
- Yes
Legacy Posted Date
2022-02-22First Open Access (FOA) Date
2022-02-22First Compliant Deposit (FCD) Date
2022-02-21Usage metrics
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