The IPO Underpricing Phenomenon – An Analysis of the Romanian Capital Market

Abstract

Why companies give up to substantial sums of money when, durring an Initial Public Offer (IPO), they sell securities at a lower price, compared to the one obtained at the end of the first trading session, is an intensely debated question in the literature. After we systematize the main theories that explain the underpricing behavior, according to last relevant research, the paper objective is to analyze the domestic capital market in order to identify the level of the studied phenomenon. Using the adjusted initial return for the succesuffully closed IPOs, we measure the underpricing level and offer an interesting view to investors and companies.underpricing theory, domestic capital market, investors, company