An examination of installment receipt initial public offerings (IPOs) and implications for the efficiency of the Canadian capital market

Abstract

In this paper, we investigate the effects of installment receipt IPOs on the short term and long term prices of the underlying securities. Our findings are that: there exist both short term and long term trends in prices implying that investors view the issue as a bargain and therefore buy the issue for both short term and long term gains; that the dominant factor affecting investor uncertainty is the level of confidence attached to the underwriter; and that for installment receipt IPOs, investors have the time leverage to monitor the activities of the firm before making a commitment to purchase the security.