Determinants of the Components of IPO Initial Returns: Paris Stock Exchange

Abstract

This study examines a sample of 143 French companies placed on the stock market over the period 2006-2010. Our cross-sectional analysis shows that it is essential to separate the initial return into pre-market deliberate underpricing and aftermarket overpricing. Our work contradicts, in part, previous studies in that the initial returns established, during the listing period, can explain not only IPO underpricing, but also overpricing. In other words, the listing price reflects the private information collected during the process of going public and, partially, public information (stock market behaviour) known at the time of the offer.