Authors: Maxime Gauvin; Gabriel J. Power
Addresses: Corporate Banking Division, Bank of Montreal Capital Markets, Montreal, QC, Canada ' Department of Finance, Insurance and Real Estate, FSA ULaval Business School, Université Laval, Québec, G1V 0A6, Canada
Abstract: IPO underpricing is a well-documented stylised fact in financial markets. Although many explanations have been considered, the role of size offering is under-studied. This paper investigates US IPO underpricing in a setting that allows for size offering, leverage, and Fama-French risk factors. We find that, across specifications, size offering is economically and statistically significant. IPO underpricing is decreasing in the size offering, controlling for other variables. Implications for investors and firms are discussed and related to firm ex ante uncertainty.
Keywords: initial public offering; IPO; underpricing; abnormal return; size; offering; equity; debt; leverage; risk; asymmetric information.
International Journal of Managerial and Financial Accounting, 2019 Vol.11 No.3/4, pp.222 - 237
Received: 04 Jun 2018
Accepted: 22 Mar 2019
Published online: 04 Dec 2019 *