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Master's Thesis from the year 2013 in the subject Business
economics - Banking, Stock Exchanges, Insurance, Accounting, grade:
2.3, University of Duisburg-Essen, course: Energy & Finance,
language: English, abstract: The Initial Public Offering (IPO)
which marks one the most important events of a company basically
aims to generate maximum proceeds by selling company's shares to
investors. Nevertheless, the shares they sell often seem to be
underpriced, insofar that the price significantly soars on the
first trading day. Consequently, the company generates fewer
proceeds and, hence "leaves money on the table." Since the very
first detection of this phenomenon in the United States in 1969,
several subsequent studies documented the existence of worldwide
IPO underpricing nowadays. Considering that underpricing is costly
for the company, a question arises why, therefore, despite the fact
that the companies "leave money on the table," they do not try to
avoid this by setting the issuing price on the very high? One of
the most striking features of this question is that it had inspired
many researchers who tried to explain in various models why IPOs
are generally underpriced. Besides, a lot of theoretical
explanations concerning this phenomenon have been given by now;
however, no common sense has been so far developed. ...]
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