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Why are European IPOs so rarely priced outside the indicative price range?

Abstract:

Unlike in the U.S., the initial price range for European IPOs is seldom revised, although issues are often priced at the upper bound. We develop a model that explains this seemingly inefficient pricing behavior. As in Europe, but not in the U.S., underwriters in the model obtain information from investors before establishing the indicative price range. A commitment to stay within the range is necessary to extract private information from investors. Ours is therefore the first treatment in whi...

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Publication date:
2006-01-01
URN:
uuid:4aa6ed1e-af01-4eeb-a9a6-216e1cad1daa
Local pid:
oai:eureka.sbs.ox.ac.uk:1371

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