Initial public offerings: theory and empirical analysis of the French case.

Summary In French IPOs, issuing companies can choose an IPO procedure from a variety of sales mechanisms. The formation of the price, the allocation of shares to investors and the role of intermediaries differ according to the procedures. The multiplicity and diversity of IPO procedures and institutional contexts make it possible to propose an original empirical study of IPOs on the second market in France. Various hypotheses formulated to explain the underpricing of securities are tested and, given the specificity of the French institutional context, particular tests are proposed. The database consists of all listings on the second market from 1983 to 1994. The empirical tests concern : - the presence of an agency problem between the intermediaries and the firm - the existence of the "winner's curse" phenomenon highlighted by Rock (1986), in the context of public offerings. - the partial adjustment of prices to market demand during sales. - the strategic behavior of the intermediaries (the introducing bank and the specialist brokerage firm) when choosing the selling mechanism. - the building of a reputation for the offering.