The Informational Content of Initial Public Offerings / Ian Gale, Joseph Stiglitz.

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Gale, Ian

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w3259.Publication details: Cambridge, Mass. National Bureau of Economic Research 1990.Description: 1 online resource: illustrations (black and white)Online resources:

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Abstract: The ability of capital markets to distinguish firms of different value by the size of their initial equity offerings is attenuated when insiders can sell equity more than once. A model is developed in which there is price risk from holding equity between periods. When the uncertainty is small. there must be pooling in the first period. When uncertainty is large. the pooling equilibria dominate the separating equilibrium.

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Previous	nber w3256 A Quick Refresher Course in Macroeconomics /	nber w3257 The Impact of the 1986 Tax Reform Act on Personal Saving /	nber w3258 Designing Policies to Open Trade /	nber w3259 The Informational Content of Initial Public Offerings /	nber w3260 The Effects of Mandating Benefits Packages /	nber w3261 Product Innovations, Price Indices and the (Mis)Measurement of Economic Performance /	nber w3262 Pay, Performance, and Turnover of Bank CEOs /	Next

February 1990.

The ability of capital markets to distinguish firms of different value by the size of their initial equity offerings is attenuated when insiders can sell equity more than once. A model is developed in which there is price risk from holding equity between periods. When the uncertainty is small. there must be pooling in the first period. When uncertainty is large. the pooling equilibria dominate the separating equilibrium.