Why are the French so different from the Germans? Underpricing in IPOs on the euro new markets

M. Goergen, A. Khurshed, L.D.R. Renneboog

Research output: Contribution to journalArticleScientificpeer-review

Abstract

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.
Original languageEnglish
Pages (from-to)260-272
JournalInternational Review of Law and Economics
Volume29
Issue number3
Publication statusPublished - 2009

Fingerprint

Euro
firm
market
France
stock exchange
selling
investor
demand
evidence
New markets
Underpricing

Cite this

@article{5876ae8315254c6386e1114ed7f93ac2,
title = "Why are the French so different from the Germans? Underpricing in IPOs on the euro new markets",
abstract = "We study the underpricing of firms listed on the two largest EuroNM stock exchanges, the Neuer Markt of Germany and the Nouveau March{\'e} 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.",
author = "M. Goergen and A. Khurshed and L.D.R. Renneboog",
note = "Appeared earlier as CentER DP 2006-24",
year = "2009",
language = "English",
volume = "29",
pages = "260--272",
journal = "International Review of Law and Economics",
issn = "0144-8188",
publisher = "Elsevier Inc.",
number = "3",

}

Why are the French so different from the Germans? Underpricing in IPOs on the euro new markets. / Goergen, M.; Khurshed, A.; Renneboog, L.D.R.

In: International Review of Law and Economics, Vol. 29, No. 3, 2009, p. 260-272.

Research output: Contribution to journalArticleScientificpeer-review

TY - JOUR

T1 - Why are the French so different from the Germans? Underpricing in IPOs on the euro new markets

AU - Goergen, M.

AU - Khurshed, A.

AU - Renneboog, L.D.R.

N1 - Appeared earlier as CentER DP 2006-24

PY - 2009

Y1 - 2009

N2 - 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.

AB - 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.

M3 - Article

VL - 29

SP - 260

EP - 272

JO - International Review of Law and Economics

JF - International Review of Law and Economics

SN - 0144-8188

IS - 3

ER -