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| Author: | Aggarwal, R. K. Krigman, L. Womack, K. L. |
| Title: | Strategic IPO underpricing, information momentum, and lockup expiration selling |
| Journal: | Journal of Financial Economics
2002 : OCT, VOL. 66:1, p. 105-137 |
| Index terms: | Initial public offerings Strategic management Business information Share ownership Stock returns |
| Language: | eng |
| Abstract: | The authors develop a model in which managers strategically underprice IPOs to maximize personal wealth from selling shares at lockup expiration. Firstday underpricing generates information momentum by attracting attention to the stock and thereby shifting the demand curve for the stock outwards. This allows managers to sell shares at the lockup expiration at prices higher than they would otherwise obtain. The authors find that higher ownership by managers is positively correlated with first-day underpricing, underpricing is positively correlated with research coverage, and research coverage is positively correlated with stock returns and insider selling at the lockup expiration. |
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