Handbook of Research on IPOs
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Handbook of Research on IPOs

Edited by Mario Levis and Silvio Vismara

The Handbook of Research on IPOs provides a comprehensive review of the emerging trends and directions in the global initial public offerings (IPO) markets. The empirical evidence included in the book covers Europe, the US and the Far East, and presents a truly global perspective of IPO markets around the world and at the different stages of the entire IPO process.
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Chapter 8: Underwriter reputation, bookbuilding and IPO duration

Hugh M.J. Colaco and Shantaram P. Hegde


Consider the sample of firms that filed for an initial public offering (IPO) in the United States (US) in August 2000, at the end of the Internet bubble. Of the 26 firms that filed to go public that month, 14 (or 54 percent) eventually withdrew. Contrast that with a withdrawal rate of only 24 percent for the 1986–2009 period. While the greater riskiness of firms going public during the Internet bubble may partly account for the greater withdrawal rate, the above example also reflects the inability of underwriters (assigned with taking a firm public) to predict future market conditions. Since only 10 percent of firms that withdraw are successful in going public a second time (Dunbar and Foerster, 2008), the IPO timing decision is important. Given the inability to forecast market conditions, Colaco and Hegde (2012) argue that a firm and its underwriter should prefer to spend less time in registration. Also, after filing their prospectus with the securities regulators that reveal some sensitive information about their business plans to the public, new firms face serious competitive threats that could erode growth prospects for their new products and services.

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