Why Does Ipo Volume Fluctuate So Much Lowry 2020

Abstract

IPO volume fluctuates substantially over time.

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This paper compares the extent to which the aggregate capital demands of private firms, the adverse-selection costs of issuing equity, and the level of investor optimism can explain these fluctuations. Empirical tests include both aggregate and industry-level time-series regressions using proxies for the above factors and an analysis of the relation between post-IPO stock returns and IPO volume. Results indicate that firms’ demands for capital and investor sentiment are important determinants of IPO volume, in both statistical and economic terms.

Adverse-selection costs are also statistically significant, but their economic effect appears small.

Journal

Journal of Financial Economics – Elsevier

Published: Jan 1, 2003