Underpricing of seasoned issues

John E. Parsons*, Artur Raviv

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

34 Scopus citations

Abstract

In this paper we provide a model of the underwritten offerings of new shares of seasoned securities. Our purpose is to explain why the offering price chosen by the underwriter is lower than the market price of the firm's shares. Our model recognizes the interdependence between the markets surrounding the announcement and sale of the new issue and recognizes as well the effect which asymmetric information regarding investor demands has upon the prices in these markets.

Original languageEnglish (US)
Pages (from-to)377-397
Number of pages21
JournalJournal of Financial Economics
Volume14
Issue number3
DOIs
StatePublished - Sep 1985

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management

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