Optimistic Investors, IPOs Cycle and Real Investment

@inproceedings{Bouis2003OptimisticII,
  title={Optimistic Investors, IPOs Cycle and Real Investment},
  author={Romain Bouis},
  year={2003}
}
Abstract This paper studies the dynamics of the IPO (Initial Public Offering) market and its effect on real investment decisions in emerging industries. We first propose a model of IPOs cycle based on divergence of opinion among investors and short-sale constraints. Using a real option approach, we show that firms are more likely to go public when the ratio of overvaluation over profits is high, that is after stock market run-ups. Because initial returns increase with the demand from optimistic… CONTINUE READING

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