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Strategic Overpricing Of Initial Public Offerings, Zheng Liu

Electronic Thesis and Dissertation Repository

This dissertation extends theory and empirical research on Initial Public Offerings (IPOs) to include the unique context faced by underwriters that have the flexibility to overprice cold offerings. First, it argues that underwriters have the incentive to deliberately overprice weakly-received offerings in order to avert potential withdrawal of the offerings and loss of underwriting commissions. It then empirically tests this argument and finds supporting evidence. Measuring underwriter pricing intention by the NASDAQ-adjusted percentage change from the offer price to the closing price three days prior to the end of the quiet period, we find deliberate overpricing to be more pronounced …