Title: Information Asymmetry in the Post-IPO Market: Analysis Based on Shareholding Pattern Data for Initial Public Offerings (IPOs) from India
Abstract:The theoretical literature on Initial Public Offerings (IPOs) strongly argues for the theory of ‘Information Asymmetry’. The existence of asymmetric information problem is mainly attributable to the l...The theoretical literature on Initial Public Offerings (IPOs) strongly argues for the theory of ‘Information Asymmetry’. The existence of asymmetric information problem is mainly attributable to the lack of trading history for IPO firms and superior information possessed by different entities such as promoters, institutional investors and underwriters. The theory of ‘Information Asymmetry’ claims that there are two prominent groups of investors i.e. sophisticated investors and unsophisticated investors in IPO market. Unlike unsophisticated investors, sophisticated investors possess private information which they capitalize from their investments in IPOs. If sophisticated investors possess an informational advantage over unsophisticated investors, they are supposed to identify the strength and quality of firms issuing IPOs. Consistent with this conjecture, we study whether sophisticated investors really have private information about IPOs and utilize their information advantage in trading in secondary market. We focus on the asymmetric information among investors after the IPO is launched and traded in the aftermarket. The paper helps to shed additional light on empirical issues of asymmetric information in the IPO aftermarket using Indian IPO data.Read More
Publication Year: 2012
Publication Date: 2012-04-01
Language: en
Type: article
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