To Wait or Not to Wait: When Do Announced Initial Public Offerings are Completed? (original) (raw)

This paper explores the rarely tackled issue of the information content of the Initial Public Offerings (IPOs) waiting period length. The external preparation delay for an IPO is important since a long waiting period can alleviate concerns public investors may have about the financial health of the issuer and then reduce information asymmetry and adverse selection risk that are prominent in the IPO market. It is also important for issuers or banks since they learn different types of information during this period (private, public or spillover). We propose a model that formalizes the optimal external timing for an IPO using real options concept, derived underpricing, examine comparative statics and finally present empirical analysis. Our empirical investigations explore the determinants of the IPO waiting period length and how this period affects investors' beliefs, the market reaction, the probabilities of syndicate size switch and subsequent SEO decision. We find strong evidenc...