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Full-Text Articles in Securities Law
Correcting The Empirical Foundations Of Ipo-Pricing Regulation, Royce De R. Barondes
Correcting The Empirical Foundations Of Ipo-Pricing Regulation, Royce De R. Barondes
Faculty Publications
Recent events are replete with stories of fraudulent or opportunistic behavior in the initial public offering (IPO) process - behavior that extended to the highest-reputation investment banks. Curiously, notwithstanding this evidence, recent financial economics literature asserts investment bank conflicts of interest certify IPO issuers. This Article develops new empirical evidence that casts doubt on this certification hypothesis by examining the pre-IPO price adjustment of IPOs involving qualified independent underwriters (QIUs), particularly IPOs in which more than ten percent of the net proceeds are being directed to participating investment banks (e.g., to repay a prior extension of credit). These offerings have …