Industry Performance and the Underpricing of Initial Public Offerings

Open Access
Author:
Heim, Brandon Robert
Area of Honors:
Finance
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
  • Laura B Field, Thesis Supervisor
  • James Alan Miles, Honors Advisor
Keywords:
  • IPO
  • Initial Public Offering
  • Underpricing
Abstract:
Firms often choose to raise capital through an initial public offering of equity. There are a variety of factors incorporated into a decision to go public, and the process leading up to an initial public offering is often characterized by uncertainty. As a result, the initial return of initial public offerings, which is the difference between the offer price and the first-day closing price, has been an intensely debated topic. The initial return is typically positive, which indicates underpricing of the equity issue. Often, this positive return is quite significant. For several decades, there have been numerous attempts in research to find determinants of underpricing. This paper focuses on one independent variable, industry performance in advance of an initial public offering, to determine whether industry performance leading up to an initial public offering has an effect on the observed underpricing.