6533b854fe1ef96bd12ae134
RESEARCH PRODUCT
Putable common stock
Salvatore CantaleAnnalisa Russinosubject
FinanceunderpricingEconomics and Econometricsbusiness.industryInformation valueFinancial economicsStrategy and ManagementCorporationPhenomenoninstrumentsEconomicsCommon stockBusiness and International ManagementbusinessInitial public offeringLump sumFinancedescription
Abstract The underpricing of initial public offerings is a well-documented phenomenon in the financial literature. The purpose of this paper is to show how this empirical regularity could be solved by an appropriate choice of financing instruments, namely, by an intelligent mix of common stocks and put options. The latter additional instrument, modeled in this paper as a lump sum paid by insiders of the firm to outsiders, helps alleviate the asymmetry of information existing between insiders and outsiders of the corporation, allowing good firms to sell the package they offer at the full information value.
| year | journal | country | edition | language |
|---|---|---|---|---|
| 2004-11-01 | Journal of Corporate Finance |