Clustering of initial public offerings, information revelation and underpricing

Article Abstract:

By providing an analysis of sequential going-public decisions the paper outlines conditions under which `hot issue markets' arise, i.e. under which the likelihood of a second initial public offering increases after a first firm has gone public. Two effects can trigger the rise of hot issue markets in a setting with asymmetric and costly information about both firm quality and industry prospects. The risk-averse entrepreneur can be subject to risk-induced selling pressure because of uncertain industry prospects conveyed by a first IPO in the industry. Also, investors can free-ride on the industry news, and increase their valuation for a second firm by abstaining from further costly information production. Finally, the model offers an explanation for the empirical finding that hot issue markets exhibit a higher degree of underpricing than cold issue markets. [C] 2001 Published by Elsevier Science B.V. All rights reserved. JEL classification: G32 Keywords: Initial public offerings; Asymmetric information; Clustering; Underpricing

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Curtailing the black box: German banking groups in the transmission of monetary policy

Article Abstract:

The paper examines the role of portfolio decisions of German banking groups in the transmission of monetary policy. A small econometric model is augmented with segregated bank balance-sheet variables in order to study potentially different effects of tight money on these variables. The results provide evidence for banks playing an active role in the transmission process and are beneficial for two fields of research: The findings indicate sectoral differences of monetary policy in line with transmission models based on informational frictions. In addition, the results lend econometric support to the existence of close bank--customer ties for certain banking groups in Germany: Whereas large banks adjust their credit position markedly following a monetary shock, the smaller savings-banks and credit cooperatives seem to shield their customers from the brunt of a policy tightening. JEL classification: E44; E51; E52; G21 Keywords: Monetary transmission; VAR; Sectoral effects; Relationship banking

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