Dutch-auction IPOs: institutional development and underpricing performance
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- Robinson, M.A. & Robinson, R. J Econ Finan (2012) 36: 521. doi:10.1007/s12197-010-9166-3
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The Dutch-auction method of bringing IPOs to market has been used sparingly since its initiation in 1999 despite the potential for this method to lead to more fully-priced issues. The development of Dutch-auctioned IPOs is documented here, and institutional details are reviewed. An empirical investigation of the characteristics of these IPOs is presented. The evidence indicates smaller magnitudes of underpricing of Dutch-auctioned IPOs relative to traditional IPOs. A multi-variate analysis indicates, however, that this smaller degree of underpricing is due to factors other than the Dutch-auction process. The evidence strongly reinforces the institutional rationing hypothesis for underpricing. It also contributes to the international evidence of the failure of auctioned IPOs to avoid underpricing.