The Pricing Behavior of IPOs: Evidence from Germany

Hannes Kiefer

Student thesis: Master thesis


This thesis aims to shed light into one of the most puzzling phenomena, the
systematically underpricing of initial public offerings (IPOs) and the associated
substantial share price increase on the first trading day. In particular, the pricing
behavior of 130 German IPOs between 2001 and 2019 is examined by empirically testing explanations from the asymmetric information theories. On average, I find that the IPOs are underpriced by 6.17%. It is shown that the popular theory of the Winner’s curse is not able to explain the observed underpricing. However, the findings point towards a significant reduction of asymmetric information and the associated IPO underpricing when having a pre-IPO lending relationship with a potential underwriting institution. In fact, my results indicate that such a relationship is able to reduce underpricing by more than 7%. These findings are robust to controlling for both company as well as offering characteristics.

EducationsMSc in Finance and Investments, (Graduate Programme) Final Thesis
Publication date2020
Number of pages109