[go: up one dir, main page]

IDEAS home Printed from https://ideas.repec.org/a/fma/fmanag/garfinkel93.html
   My bibliography  Save this article

IPO Underpricing, Insider Selling and Subsequent Equity Offerings: Is Underpricing a Signal of Quality?

Author

Listed:
  • Jon A. Garfinkel
Abstract
Recent papers posit that a firm may deliberately underprice its IPO in order to inform the market that the firm is of high quality. These papers argue that underpricing is a vehicle whereby firms can signal their favorable private information and thereby increase the price received in subsequent securities offerings. Similarly, insiders may also recoup the costs of underpricing through subsequent open market sales of their shares at a more favorable price. I test the implications of these models and find evidence generally inconsistent with their predictions. Specifically, I examine the relationship between IPO underpricing and the likelihood of returning to the market with a seasoned equity offer or an open market insider sale. Overall, I find no significant relation between IPO underpricing and the probability of reissue, after controlling for factors that may affect both underpricing and the probability of reissue. In addition, I find no relationship between underpricing and the probability of an open market insider sale. Thus, it appears that firms are not underpricing in a deliberate effort to inform the market of their quality.

Suggested Citation

  • Jon A. Garfinkel, 1993. "IPO Underpricing, Insider Selling and Subsequent Equity Offerings: Is Underpricing a Signal of Quality?," Financial Management, Financial Management Association, vol. 22(1), Spring.
  • Handle: RePEc:fma:fmanag:garfinkel93
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fma:fmanag:garfinkel93. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Courtney Connors (email available below). General contact details of provider: https://edirc.repec.org/data/fmaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.