Going Public The Theory and Evidence on How

During its life, a company must make the critical decision of if, and when, to 'go public' by listing themselves on the stock exchange. Two anomalies are apparent: that companies taking this route systematically initially underprice their shares and that over the longer term they under-perform other companies. This second edition of Going Public investigates these issues in a non-technical manner.

Tim Jenkinson is a lecturer at the University of Oxford and Fellow in Economics at Keble College. He is also a Research Fellow of the Centre for Economic Policy Research in London. He is Managing Editor of the Oxford Review of Economic Policy and member of the editorial board of Oxford Economic Papers.
Alexander Ljungqvist is a Lecturer in Management Studies at the University of Oxford and Bankers Trust Fellow in Finance at Merton College.

Part I The IPO Market

Introduction

3

(26)

How to Go Public

9

(14)

IPO Methods

23

(2)

The Costs of Going Public

25

(3)

Summary

28

(1)

Stylized Facts

29

(34)

Introduction

29

(8)

Underpricing

37

(6)

Cycles in IPO Volume and Initial Returns

43

(8)

Long-Run Performance and the `New Issues Puzzle'

51

(7)

Summary

58

(5)

Part II Theory and Evidence

Asymmetric Information

63

(45)

Adverse Selection Models: The Winner's Curse

63

(12)

Underpricing as a Signal of Firm Quality

75

(11)

Principal---Agent Models

86

(2)

Information Revelation Theories

88

(18)

Summary

106

(2)

Institutional Explanations

108

(19)

Legal Liability

109

(5)

Price Support

114

(13)

Ownership and Control

127

(12)

Underpricing as a Means to Retain Control

128

(8)

Underpricing as a Means to Reduce Agency Costs

136

(2)

Discussion

138

(1)

Long-Run Performance

139

(30)

Long-Run Underperformance in Theories of Underpricing

140

(9)

Behavioural Explanations of Long-Run Underperformance

149

(12)

Measurement Problems

161

(8)

Part III Policy Implications

Privatization

169

(24)

Privatization Objectives

170

(6)

Privatization Techniques

176

(11)

Case Study: The UK Privatization Programme

187

(6)

Conclusions and Future Developments

193

(14)

An Assessment of the Theoretical Literature

194

(5)

Possible Future Developments

199

(8)

References

207

(16)

Index

223

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Going Public The Theory and Evidence on How Companies Raise Equity Finance

Summary

Author Biography

Table of Contents

Supplemental Materials