This dissertation consists of three related essays on Initial Public Offerings (IPOs) primary market pricing. The aim of this study is to examine the impact of underwriters- institutional investors on IPO primary market pricing. In the first essay we review existing literature by highlighting the way in which relationships between the key parties of an IPO (issuing firm, investment banks, and institutional investors) shape the entire pricing process. Because of the lack of transparency in bidding and allocation data, existing mixed evidence on IPO primary market suggests that the role of repeated interactions between the three major parties might play a crucial role in that they are likely to reduce the likelihood of asymmetric information problems or increase the conflict of interest. In the second essay we propose a model of primary market pricing in which the incomplete adjustment of the offer price to its maximum achievable level depends on the intensity of interactions between underwriters- institutional investors in the years before the IPO. Using a stochastic frontier approach on a sample of 1,677 US IPOs between 2000 and 2016, the paper shows that the more these players regularly work together, the more the IPO offer price is set closer to the fair value of the issuing firm. Finally, we investigate the mechanisms that are behind the way IPO price ranges are set in the due diligence step. Using different network centrality measures on a sample of 1,246 US IPOs issued between 2004 and 2016, we demonstrate that IPOs underwritten by book managers having more central investors’ networks and a higher level of investor attention (proxied by the search volume in Google) are more likely to be set with a price range that follows SEC’s indications. This study also provides an analysis of the determinants of the dimension of the IPO filing price ranges.
La tesi consiste in tre saggi sul pricing nel mercato primario delle Initial Public Offerings (IPOs). Lo scopo dello studio è quello di analizzare l’impatto che, relazioni ripetute fra banche di investimento e investitori istituzionali hanno, sulle dinamiche di prezzo nella fase di quotazione del titolo. In particolare, la rassegna della letteratura, proposta nel primo saggio, evidenzia come le relazioni fra i principali attori coinvolti nel processo di quotazione condizionano l’intero mercato primario. Tuttavia, la mancanza di dati ufficiali, su allocazioni ed offerte degli investitori istituzionali, ha reso difficile stabilire se dette relazioni determinano un conflitto di interessi o una riduzione delle asimmetrie informative. Nel secondo saggio viene proposto un modello di pricing del mercato primario nel quale il mancato aggiustamento del prezzo di offerta rispetto al massimo potenziale viene spiegato dall’intensità delle relazioni fra banche e investitori istituzionali partecipanti all’IPO. Utilizzando un modello di frontiera stocastica ed un campione di 1,677 IPOs quotatesi fra il 2000 e il 2016, sul NASDAQ e sul NYSE, lo studio dimostra che il prezzo di offerta viene fissato più vicino al valore “fair” dell’emittente quando partecipano coppie di banche-investitori istituzionali con relazioni pregresse. Infine, il terzo studio analizza le dinamiche che guidano la scelta della forchetta dei prezzi nella fase di due diligence. Utilizzando diverse misure di centralità derivanti dalla Social Network Analysis (SNA) e impiegando un campione di 1,246 IPOs quotatesi fra il 2000 e il 2016, sul NASDAQ e sul NYSE, lo studio dimostra che IPOs, nelle quali le banche capofila sono in una posizione centrale rispetto al network di investitori e con un più alto livello di investor attention (catturata attraverso il volume di ricerche su Google), hanno maggiore probabilità di fissare una forchetta dei prezzi conforme a quanto stabilito dalla SEC. Lo studio propone anche un’analisi sulle determinanti della dimensione della forchetta dei prezzi.
Pricing and Interactions on IPO primary market / Severini, Sabrina. - (2019 Mar 14).
Pricing and Interactions on IPO primary market
SEVERINI, SABRINA
2019-03-14
Abstract
This dissertation consists of three related essays on Initial Public Offerings (IPOs) primary market pricing. The aim of this study is to examine the impact of underwriters- institutional investors on IPO primary market pricing. In the first essay we review existing literature by highlighting the way in which relationships between the key parties of an IPO (issuing firm, investment banks, and institutional investors) shape the entire pricing process. Because of the lack of transparency in bidding and allocation data, existing mixed evidence on IPO primary market suggests that the role of repeated interactions between the three major parties might play a crucial role in that they are likely to reduce the likelihood of asymmetric information problems or increase the conflict of interest. In the second essay we propose a model of primary market pricing in which the incomplete adjustment of the offer price to its maximum achievable level depends on the intensity of interactions between underwriters- institutional investors in the years before the IPO. Using a stochastic frontier approach on a sample of 1,677 US IPOs between 2000 and 2016, the paper shows that the more these players regularly work together, the more the IPO offer price is set closer to the fair value of the issuing firm. Finally, we investigate the mechanisms that are behind the way IPO price ranges are set in the due diligence step. Using different network centrality measures on a sample of 1,246 US IPOs issued between 2004 and 2016, we demonstrate that IPOs underwritten by book managers having more central investors’ networks and a higher level of investor attention (proxied by the search volume in Google) are more likely to be set with a price range that follows SEC’s indications. This study also provides an analysis of the determinants of the dimension of the IPO filing price ranges.File | Dimensione | Formato | |
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