An Empirical Examination of IPO Underpricing Between High-technology and Non-high-technology Firms in Taiwan (original) (raw)
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The short-run price performance of initial public offerings in Hong Kong: New evidence
Global Finance Journal, 2010
The study examines the first day returns of over 480 initial public offerings (IPO) in Hong Kong during a 12-year period (1994–2005). Based on this set of observations the study builds a comprehensive model of the short-term price performance of new offerings, in the light of the existing theoretical hypotheses about IPO underpricing. Results show clear evidence of the signaling effect of underwriters' reputation. For a set of different conditions and time periods examined, the most sought after underwriters are consistently associated with less underpriced offerings. In addition, the study shows that offerings underwritten by two or more underwriters tend to be less underpriced and that underpricing may be a signal in its own right. The study also shows that the informed demand hypothesis of Rock (1986) is supported only where some specific circumstances are verified. Finally, results confirm the recent trend (in Hong Kong) towards a less aggressive underpricing.
An Empirical Investigation of Underpricing in Chinese IPOs
SSRN Electronic Journal, 1997
We study the underpricing of Chinese IPOs, using data of 308 firm-commitment new issues. We find that underpricing can be explained in terms of a separating equilibrium under asymmetric information in which underpricing is a strategy for firms to signal their value to investors. We show that bribery is an unlikely cause of the high IPO underpricing observed in the Chinese data. We also investigate the hypothesis that various lottery mechanisms for allocation of IPO shares have exacerbated underpricing. Finally, we find that differences in initial returns between A and B shares can be explained by the differences in domestic and foreign investor's investment opportunities and investment sentiments.
Asia Pacific Journal of Management, 1991
This study provides a discriminating test of two signalling models which explain the underpricing of initial public offerings. The empirical results suggest a one-signal equilibrium which is consistent with Letand and Pyle's model, but which rejects Grinblatt and Hwang's two-signal model. The fraction of equity that the issuer retains in the firm which goes public dominates the offering price as a signal for firm quality. A higher equity fraction indicates better firm quality and therefore a lower ex ante uncertainty over firm value. Investors should then expect a smaller initial return on the offering.
Proceedings of the 7th International Conference on Multidisciplinary Research, 2018
Underpricing is a price below the market price or stock price in the secondary market higher than the stock price in the primary market in which investors are interested in purchasing. Underpricing is influenced by several factors, such as company size, return on asset, financial leverage, and percentage of public offering, trading volume, auditor reputation, company age, and industrial type to underpricing during the IPO in the Indonesia Stock Exchange. 130 samples of companies were used. The technical of collecting samples using senses. The data analyzed using multiple linear regressions. Based on the results of data analysis, trading volume and auditor reputation had significantly negative effect on underpricing , while financial leverage had significantly positive affect on u//under-pricing, while company size, company age, industrial type had insignificantly negative affect on underpricing , and percentage of public offering had insignificantly positive affect on underpricing .
Short-Run and Long-Run Performance of IPOs: Evidence from Taiwan Stock Market
Journal of Finance and Accounting, 2013
This paper studies the aftermarket stock performance of IPOs in short-run and long-run, and examines whether the long-run underperformance exists in Taiwan stock market. This paper applies the measure of expected skewness to verify that the highly expected skewed IPO firms are overpriced and experience the long-run underperformance. We find that IPO firms are underpriced 48.54% and severely underperform from three to five years in comparison to the reference portfolios. Skewness is reported to be positively related with the underpricing level of the first day. However, our findings suggest that this skewness measure can't explain for the long-run phenomenon of IPOs.
Impact of Investors Sentiment on Ipo Performance: Evidence from Nasdaq and Nyse
Journal of Business, Economics and Finance, 2022
Purpose-The paper explores the correlation between investors' sentiment, underpricing and performance over a period of 36 months of newly issued American stocks with a sample of 199 newly listed firms on NASDAQ and NYSE within the period of January 2015 to April 2021. IPOs listed on US stock exchanges have received little attention even though anomalies related to new stock issues are well documented. We aim to fill the existing academic gap. Methodology-We have hypothesized investor sentiment as the potential explaining variable inducing the anomalies observed and we extract this variable from the American Association of Individual Investors 1 survey results per the nearest date of each IPO issue. We compute the returns in two separate timeframes. The Market Adjusted Initial Returns (MAIRs) are computed as the price change observed during the offer day, adjusted to the S&P500 index. We investigate long-term performance by calculating the Buy-and-Hold Abnormal Return (BHARs) of each IPO for a period of 36months. The company characteristics, which are age, proceeds, number of issued shares, venture capital backing status and economic sector, are retrieved from Thomson Reuter's screens to control on IPO pricing. Then we use a regression model to see whether the predictor variable has an effect on the outcome variable. Findings-We found that the correlation between the bullish ratio and the MAIRs confirms results found in previous literature and no relationship between investor sentiment and long run performance have been observed. Conclusion-We conclude that on American stock markets, the existing underpricing can be explained by investors overreacting to new issues while findings relative to the long run performance contradict earlier research, as there is no evidence of underperformance among companies that went public between January 2015 and April 2021. Further research can be oriented toward understand why the documented poor performance related to IPOs no longer exists, as well as the particular characteristics of US markets which are favorable to the profitability of the new issues in the long-term.
Review of Theoretical Explanations of IPO Underpricing
Journal of Accounting, Business and Finance Research, 2019
Motivated by a lack of availability of theoretical review of Initial Public Offerings (IPO) underpricing, this paper recognized a lack of presentation of theoretical explanations of the phenomenon of IPO underpricing in the literature. This makes scholars and investors interested in IPO underpricing research to face difficulty when it comes to the decision to employ IPO underpricing models. Hence, this paper provides a concise but comparatively adequate review of competing IPO underpricing theories. This review covered 13 theoretical models based on information asymmetry, institutional explanations, ownership and control reasons, and behavioral explanations to elucidate the phenomenon of IPO underpricing. Based on this review, the authors found that the underpricing phenomenon is eventually elucidated by the existence of information asymmetry amongst key IPO parties including the issuing firm, the underwriter, and the investor. Across the 13 reviewed IPO underpricing theories, the Entrepreneurial Wealth Losses (EWL) theory emerges as a compelling asymmetric information model. This is because it solves the problem of information asymmetry between the issuer and investor while accounting for the endogenous relationship between underwriter reputation and IPO underpricing.
Some Factors Influencing IPO Underpricing: Evidence from Indonesian Firms
Proceedings of the 2nd Economics and Business International Conference, 2019
The purpose of this paper is to investigate some factors influencing the underpricing of initial public offerings (IPOs). The intention is to determine whether IPO firms-particularly those in certain firms of the market where information asymmetry is likely to be greatest can benefit from significantly better IPO pricing by engaging the services of differentiated reputation parties. The paper examines a broad sample of initial public offerings made between 2014-2017. It also conducts multivariate tests to assess the influence of percentage of stock offer, industry specialization, Auditor reputation and underwriter reputation on IPO underpricing. The paper finds that IPOs audited by big 4 firms and underwriter reputation experience affect significantly negative on underpricing but Industry specialization and percentage of stock offer don't influence at all. The results in this paper may not be generalizable to different countries. They do, however, appear to be robust in Indonesia throughout the four-year sample period. The paper shows that it may not be feasible for all clients in certain firms of the market. However, if they can the results suggest that they could benefit from better IPO pricing.
Long-Term Mispricing and Analysts' Assessment on IPOs: Do Prior Unsuccessful Attempts Matter
2007
In this study we examine the underpricing of initial public offerings (IPOs) by firms that have private placements of equity before their IPOs (PP IPO firms). We find that PP IPOs are associated with significantly less underpricing than their peers. Furthermore, PP IPOs are associated with lower underwriting spreads, more reputable underwriting syndicates, and greater postissue analyst coverage as compared to IPOs that are issued by their industry peers under similar market conditions. Consistent with the implications of the information asymmetry explanation for IPO underpricing, our findings suggest that companies could benefit by conveying their quality via successful pre-IPO private placements that help reduce the cost of going public.