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Underpricing of Seasoned Issues, Journal of Financial Economics

Abstract

In this paper we provide a model of the underwritten offerings of new shares of seasoned securities. Our purpose is to explain why the offering price chosen by the underwriter is lower than the market price of the firm's shares. Our model recognizes the interdependence between the markets surrounding the announcement and sale of the new issue and recognizes as well the effect which asymmetric information regarding investor demands has upon the prices in these markets.

Type

Article

Author(s)

John E. Parsons, Artur Raviv

Date Published

1985

Citations

Parsons, E. John, and Artur Raviv. 1985. Underpricing of Seasoned Issues. Journal of Financial Economics. 14(3): 377-397.

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