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The research investigates why IPOs are often overpriced and how interactions between entrepreneurs and underwriters affect pricing.

April 1, 2026Open Access

Are IPOs "overpriced"? : strategic interactions between the entrepreneur and the underwriter

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This research demonstrates how entrepreneur-underwriter interactions lead to overpriced IPOs, suggesting implications for investors.

The research investigates why IPOs are often overpriced and how interactions between entrepreneurs and underwriters affect pricing.
Examined common IPO puzzles of underpricing and long-term underperformance.
Analyzed the strategic interactions between entrepreneurs and underwriters.
Conducted an experiment to test the hypotheses about pricing distortions.
Identified that the initial listing price is often set higher than the offering price.
Concluded that the offering price is generally overpriced due to strategic interactions.
Observed that share prices tend to drop significantly after the IPO as information asymmetry decreases.

Yamamoto et al. (2023) studied this question.

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