The valuation of IPO and SEO firms
نویسندگان
چکیده
Ž . We examine the pricing of initial public offering IPO and seasoned equity offering Ž . 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. q 2001 Elsevier Science B.V. All rights reserved. JEL classification: G30, Corporate finance—general; G32, Financing policy; G14, Information and market efficiency; C11, Bayesian analysis; C15, Statistical simulation methods
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