This paper reviews the theory and evidence on the process by which corporations raise debt and equity capital and the associated effects on security prices. Findings from related transactions are used to test hypotheses about the stock price patterns accompanying announcements of security offerings. Various contractual alternatives employed in security issues are examined; for example, rights o...

Abstract We analyze a regulatory change in the Japanese IPO market that created an abrupt shift from hybrid price‐discriminatory auctions to bookbuilding. find bookbuilding leads higher underpricing than auctions. Furthermore, we evidence price accuracy tends be for The results hold under variety of OLS specifications and with regression discontinuity designs exploiting regulation.

When firms go public in an IPO, they must choose a number of shares to offer and a price level for those shares. Given an estimated total value, this division would seem to have little economic significance. Casual empiricism and the evidence from stock splits, however, suggest that firms do not choose their IPO share price level arbitrarily. We ask whether IPO prices are informative, in the se...

Using a sample of 204 UK initial public offerings (IPOs), we empirically analyze the motive for and the timing of IPO decision by examining the determinants of IPO structure. Linked to IPO structure, the determinants of underpricing and the pattern of seasoned equity offerings (SEOs) are also investigated. The data reveal that younger and smaller firms tend to go public primarily for financing ...

Using word content analysis on IPO prospectuses, we show that the liability risk associated with strategic non-disclosure of information can be mitigated by underpricing. This tradeoff explains a significant fraction of the variation in prospectus revision patterns, the partial adjustment phenomenon, and litigation outcomes. By examining ex-post litigation and involvement by IPO shareholders, w...