Chapter 15 How Corporations Issue Securities 391
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◗ FIGURE 15.3
Average initial returns
from investing in IPOs in
different countries.
Source: T. Loughran, J. R. Ritter,
and K. Rydqvist, “Initial Public
Offerings: International Insights,”
Pacific Basin Finance Journal 3,
pp.139–140, extended and updated
on bear.cba.ufl.edu/ritter. Updated
September 2014.0 50 100 150 200 250 300
Return, %Russia
Argentina
Austria
Canada
Denmark
Chile
Norway
Netherlands
Turkey
Spain
Egypt
France
Mexico
Portugal
Nigeria
Poland
Belgium
Israel
Mauritius
Italy
Hong Kong
U.K.
U.S.
Finland
South Africa
Philippines
New Zealand
Cyprus
Ireland
Australia
Pakistan
Iran
Germany
Tunisia
Indonesia
Singapore
Sweden
Switzerland
Brazil
Morocco
Sri Lanka
Thailand
Bulgaria
Taiwan
Japan
Greece
Malaysia
Korea
India
China
Jordan
Saudi ArabiaIf the skeptics are right, you might expect issuing companies to rebel at being asked to
sell stock for much less than it is worth. Think back to our example of eBay. If the company
had sold 3.5 million shares at the market price of $47.375 rather than $18, it would have net-
ted an additional $103 million. So why weren’t eBay’s existing shareholders hopping mad?
Loughran and Ritter suggest that the explanation lies in behavioral psychology and argue that