Abstract
Conventional wisdom suggests that the presence of positive first day returns for initial public offerings (IPOs). documented for almost every capital market in the world, constitutes evidence of deliberate underpricing. A number of recent studies, however, appear to cast doubt on this long-established position. They show that firms that obtained a public listing during the 1970s and 1980s underperformed similar size and industry firms by as much as 29% by the third anniversary of their first day of trading.
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