We provide a new explanation for the extremely high level of initial public offering (IPO) underpricing during the Internet bubble years of the late 1990s based on the allocation practices of underwriters. By requiring their customers to buy the stock in the aftermarket in return for IPO allocations (a tie-in agreement), the underwriters created artificial excess demand for the IPOs, leading to...

We analyze the interaction between management and investors during Chinese IPO roadshows through Jaccard Similarity analysis of written logograms. provide evidence that when agreement is high, investor optimism increases, leading to relatively large first-day underpricing. further show high biases systematically overestimate prospects poor long-run abnormal performance. different from current c...