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Why are the French so different from the Germans? Underpricing of IPOs on the Euro New Markets

Goergen, Marc, Khurshed, Arif and Renneboog, Luc 2009. Why are the French so different from the Germans? Underpricing of IPOs on the Euro New Markets. International Review of Law and Economics 29 (3) , pp. 260-271. 10.1016/j.irle.2009.02.006

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We study the underpricing of firms listed on the two largest EuroNM stock exchanges, the Neuer Markt of Germany and the Nouveau Marché of France. We find that the high underpricing in these two markets – contrary to the evidence on the US – is not driven by insiders’ selling behaviour. However, the large underpricing is caused by the high degree of riskiness of the issuing firms and by the partial adjustment phenomenon of offer prices to compensate institutional investors for the truthful revelation of their demand for the shares. For France, lock-up agreements act as substitutes to underpricing, but not so for Germany. We also explore the reasons for the large difference in underpricing between the German and the French IPOs: German firms are more underpriced because they are riskier, have larger price revisions, have less stringent VC lock-up contracts, and go public mostly during the hot issue period when the general level of underpricing in all IPO markets is substantially higher.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Subjects: D History General and Old World > DC France
D History General and Old World > DD Germany
H Social Sciences > H Social Sciences (General)
H Social Sciences > HB Economic Theory
H Social Sciences > HC Economic History and Conditions
H Social Sciences > HG Finance
Uncontrolled Keywords: IPOs; Underpricing ; Venture capital ; High technology ; European New Markets ; Lock-up agreements
Publisher: Elsevier
ISSN: 0144-8188
Last Modified: 06 Sep 2020 15:03

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