Author Description

Master's Thesis from the year 2012 in the subject Economics - Finance, grade: 1,7, language: English, abstract: Current scholarship offers a large body of research on the underpricing of IPOs, especially in the U.S. market. In a parallel manner, there is a significant body of research on the fact that a large percentage of stock underperform what should in all likelihood be their market value for years. However, what is in large manner missing from current research is an examination of how these two phenomena are related. Providing further data and insight into this relationship is the primary goal of this thesis. That goal has been met in some measure; however, even more importantly vis-a-vis this goal this thesis demonstrates that this relationship is a much more complicated one than expected and must include a wider range of variables than has been attempted. The second primary goal of this research is to begin to establish the reasons for the above phenomena: Why are some IPOs so underpriced and why is the trend toward underpricing accelerating? Why do some stocks that seem to be very sound nonetheless continue to underperform for at least five years after their IPOs? What, if anything, are the reasons behind the relationship between these two? This thesis puts forth some preliminary answers that provide beginnings of the answers to these questions. All of the research in this thesis is based on data is based on a large sample of companies that have floated their IPOs since 2000 on the New York Stock Exchange.