Explaining the underlying causes of IPO cycles
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School of Business |
Bachelor's thesis
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Date
2023
Department
Major/Subject
Mcode
Degree programme
Rahoitus
Language
en
Pages
21 + 1
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Abstract
IPOs have been a much-researched topic overall, but there is only little research on the determinants on why IPOs happens in cycles. Looking at the number of IPOs issued over time, we can clearly see fluctuations. Michelle Lowry in her paper “Why does IPO volume fluctuate so much?” from 2002, empirically tested whether the aggregate capital demands of private firms, the adverse-selection costs of issuing equity, and the level of investor optimism can explain the fluctuations over time. My study revisits this dynamic landscape by extending Lowry’s paper to more recent data obtained from the US market. While Lowry’s last observations were from late 90’s, my data starts from early 2000’ and ends in late 2010’. Similarly, to Lowry’s research, my empirical tests include aggregate quarterly and annual time-series regressions using proxies to represent the three hypotheses. My results indicated some similarities with Lowrys’s paper, suggesting capital demands and the level of investor sentiment significantly explain the fluctuations in IPO volume.Description
Thesis advisor
Kokkonen, JoniKeywords
IPO, volume, capital, demand, information, asymmetry, investor, sentiment