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The valuation of IPO and SEO firms

Koop, G.M. and Li, K. (2001) The valuation of IPO and SEO firms. Journal of Empirical Finance, 8 (4). pp. 375-401. ISSN 0927-5398

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Abstract

We examine the pricing of initial public offering (IPO) and seasoned equity offering (SEO) firms using a stochastic frontier methodology. The stochastic frontier framework models the difference between the maximum possible value of the firm and its actual market capitalization at the time of the offering as a function of observable firm characteristics. Using a new data set, we find that commonly used pricing factors do indeed influence valuation. Ceteris paribus, firms in industries with great earnings potential are more highly valued, and IPO firms are underpriced. Theories regarding underwriter reputation or windows of opportunity for equity issuance are not supported in our empirical results.

Item type: Article
ID code: 6942
Keywords: misvaluation, underpricing, stochastic frontier, bayesian inference, gibbs sampling, statistics, Commerce, Economic Theory, Statistics
Subjects: Social Sciences > Commerce
Social Sciences > Economic Theory
Social Sciences > Statistics
Department: Strathclyde Business School > Economics
Related URLs:
    Depositing user: Strathprints Administrator
    Date Deposited: 03 Oct 2008
    Last modified: 12 Mar 2012 10:46
    URI: http://strathprints.strath.ac.uk/id/eprint/6942

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