Liquidity Benefits from IPO Underpricing : Ownership Dispersion or Information Effect
Résumé
Our study investigates by which channels IPO underpricing impacts post-listing liquidity. Using a sample of IPOs undertaken on Euronext with diverse mechanisms, we show that when ownership structure is not influenced by initial underpricing, this underpricing still has a positive impact on aftermarket liquidity by a virtuous cycle related to analyst coverage. The analyst coverage purchased by initial underpricing reduces information asymmetry costs and illiquidity in the secondary market. The public information produced by analysts has a statistically more significant impact on adverse selection costs than on the proportion of informed traders in the market.
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