Underpricing of Initial Public Offerings: The Case of Portugal
- Maria Rosa Borges
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This paper analyzes the initial public offering (IPO) underpricing phenomenon in Portugal. We show that the ‘hot issue’ market of 1987, coinciding with a speculative bubble in the stock market, is well explained by investor sentiment theories and that the issuing firms seized a ‘window of opportunity’ provided by excessive demand to offer and list their shares. In IPOs prior to the 1987 crash, underpricing is very high while there is a strong reversion to fundamentals in the long run. In the period 1988–2004, we find lower IPO underpricing and overall no evidence of long-run underperformance of IPO firms. Bookbuilding IPOs are more underpriced than other price setting systems IPOs, and firms with seasoned public offerings show abnormal returns in the long run.
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- Underpricing of Initial Public Offerings: The Case of Portugal
International Advances in Economic Research
Volume 13, Issue 1 , pp 65-80
- Cover Date
- Print ISSN
- Online ISSN
- Kluwer Academic Publishers-Plenum Publishers
- Additional Links
- hot-issue markets
- investor sentiment
- Industry Sectors
- Author Affiliations
- 1. Technical University of Lisbon, Instituto Superior de Economia e Gestão, Rua Miguel Lupi, 20, 1249-078, Lisbon, Portugal