Rationing in IPOs
dc.contributor.author | Parlour, Christine A. | en_US |
dc.contributor.author | Rajan, Uday | en_US |
dc.date.accessioned | 2006-09-08T20:39:21Z | |
dc.date.available | 2006-09-08T20:39:21Z | |
dc.date.issued | 2005-03 | en_US |
dc.identifier.citation | Parlour, Christine A.; Rajan, Uday; (2005). "Rationing in IPOs." Review of Finance 9(1): 33-63. <http://hdl.handle.net/2027.42/42727> | en_US |
dc.identifier.issn | 1572-3097 | en_US |
dc.identifier.issn | 1573-692X | en_US |
dc.identifier.uri | https://hdl.handle.net/2027.42/42727 | |
dc.description.abstract | We provide a model of bookbuilding in IPOs, in which the issuer can choose to ration shares. Before informed investors submit their bids, they know that, in the aggregate, winning bidders will receive only a fraction of their demand. We demonstrate that this mitigates the winner’s curse, that is, the incentive of bidders to shade their bids. It leads to more aggressive bidding, to the extent that rationing can be revenue-enhancing. In a parametric example, we characterize bid and revenue functions, and the optimal degree of rationing. We show that, when investors’ information is diffuse, maximal rationing is optimal. Conversely, when their information is concentrated, the seller should not ration shares. We provide testable predictions on bid dispersion and the degree of rationing. Our model reconciles the documented anomaly that higher bidders in IPOs do not necessarily receive higher allocations. | en_US |
dc.format.extent | 1461378 bytes | |
dc.format.extent | 3115 bytes | |
dc.format.mimetype | application/pdf | |
dc.format.mimetype | text/plain | |
dc.language.iso | en_US | |
dc.publisher | Kluwer Academic Publishers; Springer | en_US |
dc.subject.other | Economics / Management Science | en_US |
dc.subject.other | International Economics | en_US |
dc.subject.other | Finance /Banking | en_US |
dc.title | Rationing in IPOs | en_US |
dc.type | Article | en_US |
dc.subject.hlbsecondlevel | American and Canadian Studies | en_US |
dc.subject.hlbtoplevel | Humanities | en_US |
dc.subject.hlbtoplevel | Social Sciences | en_US |
dc.description.peerreviewed | Peer Reviewed | en_US |
dc.contributor.affiliationum | Stephen M. Ross School of Business, University of Michigan, USA | en_US |
dc.contributor.affiliationother | David A. Tepper School of Business, Carnegie Mellon University, USA | en_US |
dc.contributor.affiliationumcampus | Ann Arbor | en_US |
dc.description.bitstreamurl | http://deepblue.lib.umich.edu/bitstream/2027.42/42727/1/10679_2005_Article_2987.pdf | en_US |
dc.identifier.doi | http://dx.doi.org/10.1007/s10679-005-2987-9 | en_US |
dc.identifier.source | Review of Finance | en_US |
dc.owningcollname | Interdisciplinary and Peer-Reviewed |
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