Going Public and the Sale of Shares with Heterogeneous Investors: Agent‐Based Computational Modelling and Computer Simulations
OA Location
Author(s)
Panzarasa, P
Jennings, NR
Norman, TJ
Type
Journal Article
Abstract
In this paper we use agent‐based computational modelling and computer simulations to examine the interrelationship between different selling strategies for going public. A great deal of recent empirical evidence suggests that to maximise the revenue raised from the shares sold in the public offering, it is fundamental to choose the appropriate design for the sale which, in turn, reflects the final ownership structure. This literature establishes that the market for shares is segmented and, particularly, that firms manage the sale of shares with the purpose of discriminating between relatively small and passive investors and applicants for large potentially controlling blocks. One of the key questions in this area, then, is: How and to what extent should this heterogeneity among potential investors influence the firm's strategy for selling shares? Here we attempt to address this question from the standpoint of using agent‐based computational modelling and computer simulations. Results show that the design of the sale is an important determinant of the performance of the negotiation process through which the firm is sold. A sequential sale beginning with an initial public offering of dispersed shares, followed by a negotiated sale of a controlling block is, in general, more effective than other alternative selling strategies. Changing the negotiation protocol itself can act as an effective way of impacting upon the revenue raised and the length of the process. The interrelationship between the method of sale and the performance may also depend on the degree of cognitive accuracy that characterises the negotiating agents' mental representations of their physical and social environment.
Date Issued
2001-09-30
Date Acceptance
2001-09-01
Citation
Group Decision and Negotiation, 2001, 10 (5), pp.423-470
ISSN
1572-9907
Publisher
Kluwer Academic Publishers
Start Page
423
End Page
470
Journal / Book Title
Group Decision and Negotiation
Volume
10
Issue
5
Copyright Statement
© Kluwer Academic Publishers 2001
Identifier
http://eprints.soton.ac.uk/256078/
Subjects
Social Sciences
Management
Social Sciences, Interdisciplinary
Business & Economics
Social Sciences - Other Topics
MANAGEMENT
SOCIAL SCIENCES, INTERDISCIPLINARY
agent-based modelling and simulation
sale of shares
ownership structure
initial public offering
CORPORATE-CONTROL
OWNERSHIP STRUCTURE
EMPIRICAL-ANALYSIS
COORDINATION
SHAREHOLDERS
COMPANIES
OFFERINGS
DECISION
Information Systems
1503 Business And Management
Publication Status
Published