Total and primary underpricings in the IPO marketare they explained by the same variables?

  1. Miguel Á. Acedo-Ramírez 1
  2. Francisco J. Ruiz-Cabestre 1
  1. 1 Universidad de La Rioja
    info

    Universidad de La Rioja

    Logroño, España

    ROR https://ror.org/0553yr311

Journal:
Revista española de financiación y contabilidad

ISSN: 0210-2412

Year of publication: 2019

Volume: 48

Issue: 2

Pages: 134-159

Type: Article

DOI: 10.1080/02102412.2018.1468642 DIALNET GOOGLE SCHOLAR

More publications in: Revista española de financiación y contabilidad

Abstract

This study contributes to a broadening of the international scope of empirical research on total and primary underpricings in the IPO market, and tries to show that the variables traditionally linked to information asymmetries between firms, underwriters and investors cannot adequately explain the total (offer-to-close) return. This is because, behind the total underpricing, there are variables that explain the primary return, which are associated mainly with information asymmetries, and variables related to the opening prices on the first trading day, which try to measure the behaviour and reaction of investors and underwriters to opening prices. Our results point towards this argument and allow us to show that it is more reasonable to measure underpricing through primary return (with opening prices) than through total return (with closing prices), since closing prices are contaminated by these behaviours and reactions.

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Funding information

This work has received financial support from the Ministry of Economy and Competitiveness of Spain [Grant number ECO2016-77631-R] and the University of La Rioja [Grant number EGI16/ 44]

Funders

    • EGI16/ 44
    • ECO2016-77631-R

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