TY - JOUR
T1 - Do firms get what they pay for? A second thought on over-allotment option in IPOs
AU - Bajo, Emanuele
AU - Barbi, Massimiliano
AU - Petrella, Giovanni
PY - 2017
Y1 - 2017
N2 - The over-allotment option usually complements an IPO to meet any excess demand and provides underwriters with an incentive to stabilize stock prices in the aftermarket. This clause represents an additional source of compensation to the investment bank, in exchange of some uncertain positive outcomes to the issuing firm. In this paper we provide evidence of the effects of the over-allotment option on underwriting fees, IPO underpricing, and price stabilization, and we document that, contrary to our expectations, this clause does not reduce the underwriting fees and the IPO underpricing, and it does not increase the aftermarket stabilization.
AB - The over-allotment option usually complements an IPO to meet any excess demand and provides underwriters with an incentive to stabilize stock prices in the aftermarket. This clause represents an additional source of compensation to the investment bank, in exchange of some uncertain positive outcomes to the issuing firm. In this paper we provide evidence of the effects of the over-allotment option on underwriting fees, IPO underpricing, and price stabilization, and we document that, contrary to our expectations, this clause does not reduce the underwriting fees and the IPO underpricing, and it does not increase the aftermarket stabilization.
KW - IPOs
KW - IPOs
UR - http://hdl.handle.net/10807/75926
U2 - 10.1016/j.qref.2016.02.012
DO - 10.1016/j.qref.2016.02.012
M3 - Article
SN - 1062-9769
VL - 63
SP - 219
EP - 232
JO - THE QUARTERLY REVIEW OF ECONOMICS AND FINANCE: JOURNAL OF THE MIDWEST ECONOMICS ASSOCIATION
JF - THE QUARTERLY REVIEW OF ECONOMICS AND FINANCE: JOURNAL OF THE MIDWEST ECONOMICS ASSOCIATION
ER -