Initial Public Offerings in the CMU

2018 ◽  
Author(s):  
Merritt B Fox
Keyword(s):  
Information Asymmetry ◽  
Initial Public Offerings ◽  
Capital Markets ◽  
Final Section ◽  
Public Offerings ◽  
Rating Agencies ◽  
Capital Markets Union ◽  
Preceding Discussion ◽  
Directors And Officers

This chapter begins by considering the especially severe information-asymmetry problem that plagues primary offerings of truly new securities. It then examines market-based solutions for these problems, the shortcomings of exclusive reliance on such solutions, and the rationale for having a government-designed affirmative-disclosure regime, whereby an issuer making an offering is required to answer certain questions. It also addresses the question of whether this regime should be imposed on all issuers making such offerings or only those that volunteer to be subjected to it. The remainder of the chapter considers the rationale for mandating the imposition of liability on issuers, issuer directors and officers, underwriters, dealers, and experts such as accountants or rating agencies when there have been material misstatements or material omissions of what was required to be disclosed. The final section briefly applies the preceding discussion to the efforts, as part of the Capital Markets Union, to increase the opportunities for European SMEs raise funds through public offerings.

scholarly journals An empirical study of IPO underpricing: Evidence from Chinese stock market

2014 ◽  
Vol 12 (1) ◽  
pp. 139-152 ◽  
Author(s):  
Tianxiang Xu ◽  
Yujie Zhao
Keyword(s):  
Empirical Study ◽  
Information Asymmetry ◽  
Initial Public Offerings ◽  
Initial Public Offering ◽  
Chinese Stock Market ◽  
Short Term ◽  
Ipo Underpricing ◽  
Public Offerings ◽  
Public Offering ◽  
Different Characteristics

Initial public offerings, as one of the most important activities for firms, have raising massive amount of researches. Regarding China, the stock markets are experiencing a massive level of IPO underpricing, which leads to trillions of dollars leaved on the table. This study is conducted for the question why Chinese IPO are so heavily underpriced and the determinants of IPO underpricing, also the possibility of IPO be underpriced in China. We confirm again that Chinese IPOs are heavily underpriced and the average underpricing level is about 110%. Further, Chinese IPO will experience a negative short term return starting from 10 days after listing, and there are significantly different characteristics for state owned IPOs and private IPOs. This study finds that information asymmetry, proportion of state owned share and risk are the mainly determinants of IPO underpricing in China. Additionally, one of the biggest reason that Chinese initial public offering is underpriced so much is because of government participation, since we find that firms with larger proportion of government state owned shares will be more underpriced.

The Rationale for IPO Lockup Agreements: Agency or Signaling?

2012 ◽  
Vol 15 (03) ◽  
pp. 1250013 ◽  
Author(s):  
Fei Gao ◽  
Mazhar A. Siddiqi
Keyword(s):  
Information Asymmetry ◽  
Initial Public Offerings ◽  
Agency Costs ◽  
Control Agency ◽  
Public Offerings ◽  
Long Run ◽  
Lockup Period

Most Initial Public Offerings (IPOs) feature share lockup agreements, which prohibit insiders and other pre-IPO shareholders from selling their shares for a specified period of time following IPO. We explore possible reasons why some IPO firms voluntarily agree to have a much longer lockup period than other firms. We find evidence that lockup agreements are used to control agency costs. Longer lockups are significantly related to inferior long-run returns and this relationship is stronger for firms that have less reputable underwriters. We find no evidence that lockup agreements are used to signal firm quality and we are unable to relate firm quality, as measured by long-run returns, to information asymmetry variables.

Stage financing and syndication in the IPO underpricing of venture-backed firms: Venture capital and IPO underpricing

2019 ◽  
Vol 20 (4) ◽  
pp. 289-300 ◽  
Author(s):  
Awounou-N’dri Honorine ◽  
Dubocage Emmanuelle
Keyword(s):  
Venture Capital ◽  
Information Asymmetry ◽  
Initial Public Offerings ◽  
Capital Investment ◽  
Ipo Underpricing ◽  
Data Set ◽  
Public Offerings ◽  
Venture Capital Investment ◽  
Ipo Performance ◽  
The Impact

The article investigates the impact of stage financing and syndication practices on the underpricing level of venture-backed firms (VBFs) undertaking their initial public offerings (IPOs). This empirical study uses a unique hand-collected data set concerning more than 260 VBFs that went public on Euronext Paris and Alternext between 1997 and 2013. Our findings suggest a lower level of underpricing for firms backed by syndicated venture capital investment. Additionally, we find that the syndicate size is negatively associated with the level of underpricing. However, there is no evidence that stage financing has a significant impact. Syndication thus appears to be the only relevant mechanism to improve IPO performance (measured by the underpricing level), as it reduces agency costs and information asymmetry between the different stakeholders in an IPO process.

scholarly journals The Venture Capital Certification Role In Initial Public Offerings

2016 ◽  
Vol 32 (2) ◽  
pp. 479 ◽  
Author(s):  
Tarek Miloud
Keyword(s):  
Asymmetric Information ◽  
Venture Capital ◽  
Information Asymmetry ◽  
Initial Public Offerings ◽  
High Frequency ◽  
Price Volatility ◽  
Price Difference ◽  
Public Offerings ◽  
North American Market ◽  
The Cost

Using high frequency Euronext Paris data, the paper examines the market microstructure trading characteristics of venture backed initial public offerings (IPOs) in the French market. Previous North American market studies approve the role played by venture capital (VC) firms for the certification of IPOs and their role in reducing the asymmetric information between investors. The study sample is composed of IPOs realized during the period 2000–2013 both with and without VC firm involvement. The results present no significant price difference between both IPO types. The cost of asymmetric information and of price volatility is higher for the VC-backed operations. Moreover, the study shows that underpricing is positively correlated to the cost of the information asymmetry. Contrary to previous studies, the results show that the effects of VC firm certification and monitoring are not perceived by IPO investors in the French market.

Information Asymmetry and Investor Valuations of Initial Public Offerings: Two Dimensions of Organizational Reputation as Stock Market Signals

2019 ◽  
Vol 16 (4) ◽  
pp. 945-964
Author(s):  
Yang Liu ◽  
Peng Cheng ◽  
Zhe OuYang ◽  
Ao Wang
Keyword(s):  
Information Asymmetry ◽  
Initial Public Offerings ◽  
Initial Public Offering ◽  
Two Dimensions ◽  
Negative Effects ◽  
Investor Attention ◽  
Public Offerings ◽  
Organizational Reputation ◽  
Public Offering ◽  
Organizational Value

ABSTRACTThe uncertainty and information asymmetry that surround initial public offering firms (IPOs) often introduce difficulties for potential investors to discern organizational value, thereby leading to ‘underpricing’. Using the signaling theory, we investigate the role of organizational reputation in the underpricing of IPOs. We analyze 463 initial public offerings in China from the period of 2010 to 2016 and find that being known for quality and generalized favorability dimensions of reputation are negatively related with underpricing on the first day of trading. In addition, we find that the negative effects of organizational reputation on underpricing are mediated by investor attention.

Moderating Effect of Information Asymmetry on the Signalling Role of IPO Lockup Provision

2019 ◽  
Vol 20 (4) ◽  
pp. 917-930
Author(s):  
Norliza Che Yahya ◽  
Ruzita Abdul Rahim
Keyword(s):  
Information Asymmetry ◽  
Initial Public Offerings ◽  
Negative Relationship ◽  
Well Being ◽  
Moderating Effect ◽  
Public Offerings ◽  
True Value ◽  
Negative Impacts ◽  
Using Data ◽  
Lockup Period

This article examines the moderating effect of information asymmetry on the relationship between parameters of lockup provision and flipping activity of Malaysian initial public offerings (IPOs). While the main purpose of lockup provision is to promote commitment of major shareholders for the well-being of the IPO issuing companies at least throughout the lockup period, its role could also extend as a signalling device. Information asymmetry is prevalent in the context of IPOs because information on the issuing firms is normally very limited that the evaluation of the firms’ true value becomes difficult. This study postulates that the lockup provision has a greater influence on flipping activity in higher information asymmetry companies than in lower ones. Using data from 370 Malaysian IPOs issued from January 2000 to December 2012, the results of the multiple regression analyses show that both lockup ratio and lockup period have significantly negative impacts on flipping activities. Since lockup period is uniformly longer (1 year) prior to the 2008 Equity Guidelines revision, the results imply that investors have a greater tendency to flip during the post-2008 revision period when major shareholders are perceived to be less strongly accounted for their firms’ performance. The results also show that information asymmetry moderates the negative relationship between lockup provision and flipping activity, specifically, in regard to lockup period.

Wettbewerbsbeschränkungen auf Märkten für börsennotierte Aktien und Aktienderivate

2019 ◽  
Author(s):  
Hendrik Wessling
Keyword(s):  
Financial Markets ◽  
Initial Public Offerings ◽  
Capital Markets ◽  
Comprehensive Analysis ◽  
Antitrust Law ◽  
Market Manipulation ◽  
Public Offerings ◽  
Long Time ◽  
Damage Claims ◽  
The Relationship

For a long time, markets for listed stocks and listed stock derivatives have been regarded as immune to competition restrictions or distortions. This dissertation disproves this generally accepted theory and shows that numerous anticompetitive practices can and do occur in this segment of financial markets. Its comprehensive analysis includes market cornering, agreements that restrict supply in initial public offerings and instances of coordinated market manipulation. It considers the latest empirical findings relating to capital markets and, since it refers to the point at which antitrust law and capital markets law overlap, also examines the relationship between both legal fields. Using the example of coordinated market manipulation, the author ultimately analyses sanctions and damage claims arising from parallel violations of antitrust law and capital markets law.

Impact of Quality Certification on IPO Underpricing: Evidence from India

2017 ◽  
Vol 18 (2) ◽  
pp. 428-444 ◽  
Author(s):  
Sanjay Dhamija ◽  
Ravinder Kumar Arora
Keyword(s):  
Initial Public Offerings ◽  
Credit Rating ◽  
Univariate Analysis ◽  
Excess Return ◽  
Ipo Underpricing ◽  
Public Offerings ◽  
Rating Agencies ◽  
Quality Certification ◽  
The Mean ◽  
The Impact

The study examines the impact of quality certification of initial public offerings (IPOs) arising out of lead manager’s reputation, grading by credit rating agencies, presence of anchor investors and the reputation of auditors on the level of IPO underpricing. The mean initial excess return that measures the level of IPO underpricing is 22 per cent based on a sample of 399 IPOs made by Indian companies during the period from April 2005 to March 2015. Contrary to expectations, nearly 37 per cent of the IPOs do not provide a positive initial excess return. Univariate analysis reveals that except for IPO grading, the other quality certification variables do not make a significant impact on the level of underpricing. Graded issues are more fairly priced compared to non-graded issues. The Securities and Exchange Board of India (SEBI), the capital market regulator, has recently done away with mandatory grading of IPOs. As graded issues have been observed to improve pricing efficiency, SEBI should reconsider its decision and reintroduce compulsory IPO grading. Multivariate analysis, that includes other variables, such as issue size, level of subscription and promoters holding, reveals that the two variables that have a significant influence on initial excess returns from IPOs are the issue size and the level of oversubscription of the IPO.

Initial Public Offerings of State-Owned Enterprises: An International Study of Policy Risk

2007 ◽  
Vol 42 (2) ◽  
pp. 313-337 ◽  
Author(s):  
Swee-Sum Lam ◽  
Ruth Seow-Kuan Tan ◽  
Glenn Tsao-Min Wee
Keyword(s):  
Information Asymmetry ◽  
Initial Public Offerings ◽  
International Study ◽  
Cross Sectional ◽  
Public Offerings ◽  
The Cross ◽  
Policy Risk ◽  
Practical Measure ◽  
Risk Policy

AbstractPolicy risk, rather than information asymmetry, explains the cross-sectional underpricing of privatized initial public offerings. The issuer governments of high policy risk issues tend to retain a large equity stake and underprice more with underpricing increasing in retained equity. While the issuer government's retained equity is an observable signal for policy risk, we find that the quality of a country's bureaucratic machinery is a more intuitive and practical measure of policy risk. Policy risk also explains the absence of a systematic relation between the initial returns on privatized and private initial public offerings.

Sign in / Sign up

Export Citation Format

Share Document