Partial Adjustment to Public Information and IPO Underpricing

• DOI: 10.2307/3595013
• Publication Date: 2007-02-02T22:36:08Z
• Authors: Daniel J. Bradley; Bradford D. Jordan
• Keywords: 0502 economics and business; 05 social sciences

We examine the extent to which offer prices reflect public information for 3,325 IPOs over the period 1990–1999. We focus primarily on four variables: share overhang, file range amendments, venture capital backing, and previous issue underpricing. We show that 35%–50% of the variation in IPO underpricing can be predicted using public information known before the offer date and therefore conclude that IPO offer prices underadjust to widely available public information to a much greater extent than previously documented.