ABSTRACT Many financial markets are characterized by strong relationships and networks, rather than arm's‐length, spot market transactions. We examine the performance consequences of this organizational structure in context established when VCs syndicate portfolio company investments. find that better‐networked VC firms experience significantly better fund performance, as measured proportion investments successfully exited through an IPO or a sale to another company. Similarly, companies...

ABSTRACT IPO underpricing reached astronomical levels during 1999 and 2000. We show that the regime shift in initial returns other elements of pricing behavior can be at least partially accounted for by marked changes pre‐IPO ownership structure insider selling over period, which reduced key decision makers' incentives to control underpricing. After controlling these changes, difference between 2000 preceding three years is much reduced. Our results suggest it was firm characteristics were...

We investigate whether short-termism distorts the investment decisions of stock market-listed firms. To do so, we compare behavior observably similar public and private firms, using a new data source on U.S. firms assuming for identification that closely held are subject to fewer short-termist pressures. Our results show compared with invest substantially less responsive changes in opportunities, especially industries which prices most sensitive earnings news. These findings consistent...

Journal Article Underpricing and Entrepreneurial Wealth Losses in IPOs: Theory Evidence Get access Michel A. Habib, Habib London Business School Address correspondence to School, Sussex Place Regent's Park, NW1 4SA, United Kingdom or e-mail: mhabib@london.edu. Search for other works by this author on: Oxford Academic Google Scholar Alexander P. Ljungqvist New York University CEPR The Review of Financial Studies, Volume 14, Issue 2, April 2001, Pages 433–458,...

Our model of the initial public offering process links three main empirical IPO 'anomalies' -underpricing, hot issue markets, and long-run underperformance -and traces them to a common source inefficiency.We relate markets (such as 1999/2000 market for Internet IPOs) presence class investors who are 'irrational' in sense having exuberant expectations regarding future performance.Underpricing emerge underwriters attempt maximize profits from sale equity, at expense these...

Journal Article Do Measures of Financial Constraints Measure Constraints? Get access Joan Farre-Mensa, Farre-Mensa Harvard Business School, University Search for other works by this author on: Oxford Academic Google Scholar Alexander Ljungqvist Stern School Business, New York and NBER The Review Studies, Volume 29, Issue 2, February 2016, Pages 271–308, https://doi.org/10.1093/rfs/hhv052 Published: 03 September 2015

We provide evidence for the importance of information asymmetry in asset pricing by using three natural experiments. Consistent with rational expectations models multiple assets and signals, we find that prices uninformed demand fall as increases. These falls are larger when more investors uninformed, turnover is variable, payoffs uncertain, lost signal precise. Prices partly because expected returns become sensitive to liquidity risk. Our results confirm priced imply a primary channel links...

ABSTRACT Can managers influence the liquidity of their firms’ shares? We use plausibly exogenous variation in supply public information to show that firms actively shape environments by voluntarily disclosing more than regulations mandate and such efforts improve liquidity. Firms respond an loss providing timely informative earnings guidance. Responses appear motivated a desire reduce asymmetries between retail institutional investors. Liquidity improves as result turn increases firm value....

ABSTRACT We investigate whether analyst behavior influenced banks' likelihood of winning underwriting mandates for a sample 16,625 U.S. debt and equity offerings in 1993–2002. control the strength issuer's investment banking relationships with potential competitors mandate, prior lending relationships, endogeneity bank's decision to provide coverage. Although was by economic incentives, we find no evidence that aggressive increased their probability an mandate. The main determinant lead‐bank...

ABSTRACT We examine whether irrational behavior among small (retail) investors drives post‐IPO prices. use prices from the grey market (the when‐issued that precedes European IPOs) to proxy for investors' valuations. High (indicating overoptimism) are a very good predictor of first‐day aftermarket prices, while low excessive pessimism) not. Moreover, we find long‐run price reversal only following high This asymmetry occurs because larger (institutional) can choose between keeping shares they...

Many financial markets are characterized by strong relationships and networks, rather than arm's-length, spot-market transactions. We examine the performance consequences of this organizational choice in context established when VCs syndicate portfolio company investments. VC firms that enjoy more influential network positions have significantly better fund performance, as measured proportion investments successfully exited through an IPO or sale to another company. Similarly, companies...

ABSTRACT We examine whether strong networks among incumbent venture capitalists (VCs) in local markets help restrict entry by outside VCs, thus improving incumbents' bargaining power over entrepreneurs. More densely networked experience less entry, with a one‐standard deviation increase network ties incumbents reducing approximately one‐third. Entrants established to target‐market appear able overcome this barrier entry; turn, react strategically an increased threat of freezing out any who...

ABSTRACT We provide evidence on the value of patents to startups by leveraging quasi‐random assignment applications examiners with different propensities grant patents. Using unique data all first‐time filed at U.S. Patent Office since 2001, we find that win patent “lottery” drawing lenient have, average, 55% higher employment growth and 80% sales five years later. winners also pursue more, quality, follow‐on innovation. Winning a first boosts startup’s subsequent innovation facilitating...

Using 113 staggered changes in corporate income tax rates across U.S. states, we provide evidence on how taxes affect risk-taking decisions. Higher reduce expected profits more for risky projects than safe ones, as the government shares a firm's upside but not its downside. Consistent with this prediction, find that risk taking is sensitive to taxes, albeit asymmetrically: average firm reduces response increase (primarily by changing operating cycle and reducing R&D risk) does respond cut....

ABSTRACT We provide evidence that firms attempting IPOs condition offer terms and the decision whether to carry through with an offering on experience of their primary market contemporaries. Moreover, while initial returns IPO volume are positively correlated in aggregate, correlation is negative among contemporaneous offerings subject a common valuation factor. Our findings consistent investment banks implicitly bundling factor achieve more equitable internalization information production...

We examine the costs and benefits of global integration initial public offering (IPO) markets associated with diffusion U.S. underwriting methods in 1990s. Bookbuilding is becoming increasingly popular outside United States typically twice as much a fixed-price offer. However, on its own, bookbuilding only leads to lower underpricing when conducted by banks and/or targeted at investors. For most issuers, gains outweighed additional hiring or marketing States. This suggests quality/price...