The valuation of IPO and SEO firms

G.M. Koop, K. Li

Research output: Contribution to journalArticle

21 Citations (Scopus)

Abstract

We examine the pricing of initial public offering (IPO) and seasoned equity offering (SEO) firms using a stochastic frontier methodology. The stochastic frontier framework models the difference between the maximum possible value of the firm and its actual market capitalization at the time of the offering as a function of observable firm characteristics. Using a new data set, we find that commonly used pricing factors do indeed influence valuation. Ceteris paribus, firms in industries with great earnings potential are more highly valued, and IPO firms are underpriced. Theories regarding underwriter reputation or windows of opportunity for equity issuance are not supported in our empirical results.
LanguageEnglish
Pages375-401
Number of pages26
JournalJournal of Empirical Finance
Volume8
Issue number4
DOIs
Publication statusPublished - Sep 2001

Fingerprint

Initial public offerings
Seasoned equity offerings
Pricing
Stochastic frontier
Ceteris paribus
Underwriter reputation
Market capitalization
Empirical results
Equity issuance
Factors
Firm characteristics
Industry
Methodology

Keywords

  • misvaluation
  • underpricing
  • stochastic frontier
  • bayesian inference
  • gibbs sampling
  • statistics

Cite this

Koop, G.M. ; Li, K. / The valuation of IPO and SEO firms. In: Journal of Empirical Finance. 2001 ; Vol. 8, No. 4. pp. 375-401.
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The valuation of IPO and SEO firms. / Koop, G.M.; Li, K.

In: Journal of Empirical Finance, Vol. 8, No. 4, 09.2001, p. 375-401.

Research output: Contribution to journalArticle

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