publication . Other literature type . Article . 2001

IPOs and Product Quality

Neal M. Stoughton; Kit Pong Wong; Josef Zechner;
  • Published: 01 Jul 2001
  • Publisher: University of Chicago Press
Abstract
Given recent public attention paid to high-flying Internet IPOs such as Yahoo and Amazon.com, we explore a product market motive for going public. We develop a model where consumers discern product quality from the stock price. The model predicts that only better-quality firms will go public. Effects of IPO announcements on rival firms' stock prices are related to inferences about market size and market share. The model also predicts that the likelihood of "hot issue" markets depends on the distribution of market size uncertainty and the degree of network externalities present in consumer preferences. Copyright 2001 by University of Chicago Press.
Subjects
free text keywords: Initial public offering, Economics, Financial system, Statistics, Probability and Uncertainty, Economics and Econometrics, Business and International Management, Primary market, Order (exchange), Market share, Market saturation, Market share analysis, Factor market, Finance, business.industry, business, Financial economics, Market depth
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