How Do Underwriters Select Peers When Valuing IPOs?

Andrea Signori, Stefano Paleari, Silvio Vismara

Risultato della ricerca: Contributo in rivistaArticolo in rivista

18 Citazioni (Scopus)

Abstract

Valuing initial public offerings (IPOs) using multiples allows underwriters discretion when selecting comparable firms. We find that they systematically exclude candidate comparable firms that make a given IPO appear overvalued. On average, comparable firms published in official prospectuses have 13%-38% higher valuation multiples than those obtained from matching algorithms or selected by sell-side analysts, including the same underwriter's analyst after the IPO. Even if IPOs are priced at a discount as compared to peers selected by the underwriters, they are still at a premium with regard to alternatively selected peers. Greater bias in the underwriter's selection of peers leads to poorer long run performance.
Lingua originaleEnglish
pagine (da-a)731-755
Numero di pagine25
RivistaFinancial Management
Volume43
DOI
Stato di pubblicazionePubblicato - 2014

Keywords

  • Initial Public Offerings, valuation, underwriters, comparables, multiples

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