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In this dissertation I examine the informational externalities of going public decisions for industrial and banking sector. The results show that industrial rivals have positive valuation effects only in response to venture backed IPOs and no significant reaction in response to non-venture backed IPOs. I also find evidence that the effect on rival firms is stronger if they operate in low concentrated industries (i.e. high competition) and have low growth opportunities. The relative size of IPO firm seems to play an important role in the direction and magnitude of industry rivals' valuation effects. Negative information revealed in the form of downward price revisions adversely affect rival firms' valuation. Positive information is also conveyed at the IPO announcements in banking industry. Bank rivals experience wealth gains if they are headquartered in the same state and no valuation effects if they are headquartered in the same region as the announcing bank. However, positive and significant reactions are noted in Mid-Atlantic and Southwest regions and negative reaction in Midwest region. Overall, these findings confirm that IPOs convey valuable information to the market and investors use this information to reassess the value of the rival firms.

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This paper examines the timing of initial public offerings and private placements by venture-backed companies. Using a sample of 187 venture-backed IPOs and private placements in a variety of industries between 1991 and 2000 over TSEC and OTC, we find that these companies go public when equity valuationsare high and employ private placements when values are lower. Seasoned venture capital appears to take firms public when industrial equity valuations are higher than their less experienced counterparts. The results are robust to differential specifications of control variables.

Why are initial public offerings (IPOs) underpriced? We consider this is a strategy that insiders use to maximize their personal wealth. When a company offers shares in an initial public offering, insiders typically enter into a lock-up restriction which prohibits insiders from selling their shares within a specified period after the IPO. Insiders interested in maximizing their personal wealth will take actions to maximize the lock-up expiration share price rather than the offer price. When the IPOs underprice, the share price will go up during the honeymoon period. The large run-up in the stock price will attracts interest from the media. And the enhanced coverage brings the stock to the attention of more investors. Then the demand for the stock will increase and make the stock price go up. This allows the insiders to sell shares at the lock-up expiration at price higher than he would otherwise be able to obtain. This study examines the relationship among underpricing, coverage and return. We find that stock deposit and the age of a company are positively correlated with underpricing. The electronic-related companies are much more noticeable than underpricing to lead to more coverage. We also find that coverage is positively correlated with return through the lock-up expiration.

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This paper examines the IPO pricing processes of two different markets, each of which employs bookbuilding methods for marketing the IPO shares. For each market we investigate two questions: Does bookbuilding serve mainly as a method for distributing shares, or also as a means for gathering information? And, to what extent do underwriters respond in IPO pricing to any information that they obtain through bookbuilding? We find that a direct comparison of these two markets sheds light on the bookbuilding process in each. For Nasdaq IPOs we find evidence consistent with informational rents being earned by investors for providing information during bookbuilding. On the Neuer Markt there is no such evidence. Instead, we find evidence consistent with rents being paid for information that helps underwriters to set indicative price ranges prior to bookbuilding. The two markets differ further in how underwriters respond to information in pricing IPOs. For the Neuer Markt, this response is severly constrained since underwriters do not set prices above the price ranges. We estimate the total cost of this "restriction" to be approximately one billion Euros for our sample of IPOs. While there are no such apparent restrictions for Nasdaq, we show that also on this market IPO prices are "sticky" in that underwriters respond less to information received later in the pricing process. / Series: Working Papers SFB "Adaptive Information Systems and Modelling in Economics and Management Science"

The aim of this study is to present venture creation as an alternative form of alleviating poverty and contributing positively to the economic growth of every African government. This study draws to the attention of policy-makers, the importance of venture creation in emerging economies. The author goes on further to highlights the challenges with the current models used for financing/funding new ventures, in an emerging African economy. The objective of this paper is to also highlight what needs to be done by policy-makers, to create a thriving economic environment for emerging entrepreneurs. This study seeks to highlight some of the prospects, as well as some of the impediments, experienced by the venture capital industry and start-up enterprises. The environment in which the creation of new ventures operates under in emerging African markets is reviewed, and the exit of those enterprises when they mature and graduate from a small, private company, to a publicly held company - through an Initial Public Offering (IPO) process, is examined. The benefits of exiting these ventures through an IPO, versus the more aptly applied private placement exit method, are also discussed. The impact that the behaviour and psychology of investing have on the investment trends in African economies is also discussed. The author used the qualitative research methodology to achieve the results presented in this paper. The outcomes of the study are outlined in chapter four of this paper. The respondents to the survey indicated the importance of the venture capital sector and the critical role that policy makers should be playing. There were no clear responses around the human behaviour in determining the suitable exit platform. What came out clearly in this study; was that each region in the African economy will use a different exit platform driven mainly by the economic environment. The author goes on further to conclude on the outcomes of the study and suggest further research on the topic on venture capital and initial public offerings. The participants who responded to the survey agreed with the literature reviewed, in particular around the adequate form of financing for starting up new enterprises.

The research questions investigated are: 1. Are the expected post-issue fractional holdings of the directors and officers, venture capitalists and institutions signals of firm value? 2. Are the expected post-issue fractional holdings of the directors and officers, venture capitalists and institutions signals of underpricing? and 3. Are the directors and officers, venture capitalists and institutions monitors of IPO investments? The signaling theory developed by Grinblatt and Hwang (1989) (GH) and the monitoring theory for IPO investments have been used to develop the hypotheses for this dissertation. Four factors make my methodology unique. These factors are: 1. I apply and test the GH IPO signaling model over a unique data set collected from the IPO prospectuses, proxy statements and annual reports; 2. I disaggregate the expected post-issue holdings of the different groups of pre-issue blockholders and insiders and hypothesizes that these individual groups represents signals of firm value and underpricing; 3. I hypothesize that these groups, in aggregate and separately, monitor IPO investments over the long term; And 4. I develop signaling and monitoring hypotheses to make predictions at the two stages of the IPO. The results show that firm value is positively related to the level of underpricing, at a given variance of the firms cash flows; the level of underpricing is positively related to the holdings of the directors and officers as a group and the aggregate of the directors and officers, VCs and institutions, at given variances of the firm's cash flows; the firm value is not related to the level of underpricing, at a given level of capital outlay and holdings of either the aggregate blockholders, directors and officers, VCs or institutions. For the monitoring hypotheses, the results show that the long-run buy-and-hold-returns are positively related to the investment bank reputation and the gross spread. Also, the results do not support the theories that the holdings of the VCs, institutions and the aggregate holdings of the different groups, represent the level of monitoring. Therefore, these groups do not increase the value of IPO investments over the long-run.