UK IPO Underpricing: Venture Capitalists, High-Prestige Underwriters and the Bubble Period
50 PagesPosted: 27 Feb 2005
Date Written: February 2005
We analyse the short run underpricing anomaly for a unique sample of 569 IPOs on the London Stock Exchange for the period 1985-2000 and find significant differences between the 1985-1997 period and 1998-2000 bubble period.
Venture capitalists played a certification role in the former period but this ceased during the bubble years.
These years featured significant increases in the average IPO proceeds, money left on the table, underpricing and a decline in operating quality. Furthermore, venture capitalists increasingly used prestigious underwriters with a history of underpricing during 1998-2000 which supports the corruption hypothesis of Loughran and Ritter (2004).
Capital Raising Process (Underwriting)
Keywords: New issues puzzle, prospect theory; corruption hypothesis
JEL Classification: G24, G32
Suggested Citation:Suggested Citation
Hadass, Leon and Coakley, Jerry and Wood, Andrew, UK IPO Underpricing: Venture Capitalists, High-Prestige Underwriters and the Bubble Period (February 2005).
Available at SSRN: https://ssrn.com/abstract=675101 or http://dx.doi.org/10.2139/ssrn.675101