Perspective on Underpricing of IPOs in Emerging Economies

2019 ◽  
Vol 18 (1_suppl) ◽  
pp. S87-S101
Author(s):  
L V Ramana
Keyword(s):  
Asymmetric Information ◽  
Emerging Markets ◽  
Initial Public Offerings ◽  
Emerging Economies ◽  
Important Determinant ◽  
The State ◽  
Secondary Market ◽  
Top Management ◽  
Public Offerings ◽  
Jel Classifications

Pricing of initial public offerings (IPOs) has received considerable attention from the perspective of asymmetric information theories, among others. Specific aspects of emerging markets have been incorporated into models to explain the varying degrees of underpricing. Using three features that are deemed to be important for such economies, that is, principal–principal conflicts, disclosure norms and legitimacy of the top management, and two different classes of investors, institutional and retail, two frameworks have been designed to explain the expected levels of underpricing under various pair-wise combinations of these parameters. The state of the secondary market, which is an important determinant of the decision to go public, is incorporated into the framework. JEL Classifications: G3, G14, G15, G18

scholarly journals Review of short-run performance of initial public offerings in Australia

2021 ◽  
Vol 18 (2) ◽  
pp. 188-200
Author(s):  
Lutfa Tilat Ferdous ◽  
Niroshani Parahara Withanalage ◽  
Abyan Amirah Qamaruz Zaman
Keyword(s):  
Regression Analysis ◽  
Initial Public Offerings ◽  
Stock Exchange ◽  
Secondary Market ◽  
Publicly Traded ◽  
Ipo Underpricing ◽  
Secondary Markets ◽  
Public Offerings ◽  
Short Run ◽  
Total Market

This study investigates the short-run performance of initial public offerings in Australia. Based on sources from the Morningstar DatAnalysis database, we analyzed 211 Australian publicly traded initial public offerings (IPO) listed on the Australian stock exchange between January 2011 and December 2015 using multiple regression analysis with dummies to represent industry and listing year. According to our analysis, total market return indicates an IPO underpricing phenomenon whereas secondary market shows an overpricing scenario. Moreover, this analysis supports the contention that short-run performance fluctuations were based on the listing year and industry settings. This study contributes to the literature by analysing the short-run performance of both the primary and secondary markets

scholarly journals IPOs Performance Analysis: Evidence from Emerging Markets in the Balkans

2016 ◽  
Vol 63 (3) ◽  
pp. 381-389 ◽  
Author(s):  
Goran Karanović ◽  
Bisera Karanović
Keyword(s):  
Emerging Markets ◽  
Initial Public Offerings ◽  
Public Offerings ◽  
The Balkans ◽  
Financial Variables ◽  
Balkan Countries ◽  
Short And Long Term ◽  
Long Term Performance ◽  
Term Performance

Abstract The main purpose of this paper is to investigate the performance of initial public offerings (IPOs) in the emerging markets with particular focus on the markets of Balkan countries. The paper provides analysis of long and short performance of IPOs. In the Balkan emerging markets IPOs are relatively rarely used. Although all observed Balkan countries have gone through processes of transition from planned economies to market economies in the past 25 years, just a few state-owned companies have been privatized by use of IPOs. Due to this specific nature of the companies the analyzed sample of IPOs is comprised of state-owned and non-state-owned companies. The results are interpreted and expounded accordingly, taking into consideration the aforementioned conjunction. The findings indicate that company characteristics, signalling variables and financial variables have influence on the IPOs short and long term performance. The paper provides academia and policymakers with new revelations concerning the IPO processes in Balkan emerging economies’ capital markets.

scholarly journals Trends in IPOs: The Evidence From Financial Markets

Equilibrium ◽  
2013 ◽  
Vol 8 (2) ◽  
pp. 45-63
Author(s):  
Tomas Meluzin ◽  
Marek Zinecker
Keyword(s):  
Emerging Markets ◽  
Initial Public Offerings ◽  
Secondary Data ◽  
Public Offerings ◽  
Developed Economies ◽  
Corporate Growth ◽  
World Markets ◽  
The Us ◽  
The World ◽  
European Markets

This paper deals with the analysis of initial public offerings of shares in terms of their quantity and the amount of capital raised by this form of financing on the world markets. Relevant global developments will be analyzed first, followed by a description of regional situation. The analysis is based on secondary data which are processed by descriptive statistics methods. The analysis of IPO trends on the world markets indicates that, in the period of 2004-2007, IPO-based financing of corporate growth gained in importance on both developed and emerging markets. The IPO segment was dominated by the largest emerging markets (Brazil, Russia, India and China) and at the same time the US American and Western European markets decline in their importance. The world-wide economic crisis of 2008 suppressed the interest in new IPOs, particularly in the developed economies. As the economy of most countries is beginning to revive, the interest in the IPO approach from businesses and investors is on the rise. It can be expected that, in the next few years, the arena of initial public offerings will be dominated by visionary companies operating on emerging markets where the execution of an IPO will constitute the key element in securing the capital essential for further expansion.

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.

scholarly journals KINERJA JANGKA PENDEK DAN JANGKA PANJANG SAHAM PERUSAHAAN IPO DI BURSA EFEK INDONESIA

2019 ◽  
Vol 2 (2) ◽  
pp. 437
Author(s):  
Andrew Budiman
Keyword(s):  
Initial Public Offerings ◽  
Stock Price ◽  
Secondary Market ◽  
Public Offerings ◽  
Independent Variables ◽  
Long Run ◽  
Underwriter Reputation ◽  
Long Term Performance ◽  
Term Performance ◽  
Auditor Reputation

The objectives of this research is to examine the effect of qualitative and quantitative factors to underpricing ( Y1 ), long-run underperformance ( Y2 ), and underpricing effect to long-run underperformance ( Y3 ) with ROA, DER, ROE, Age, Size, Underwriter Reputation, Auditor Reputation and Gross Proceeds as independent variables. Initial Public Offerings ( IPO ) is one of alternatives for companies to get fund from external sources in fulfilling it needs. Three phenomenons related with IPO’s are underpricing, hot-issue market and long-run underperformance. The most frequently happened phenomenon is underpricing which is a phenomenons marked by lower offering price compared to 1st day closing price. The second phenomenon, hot-issue market, is marked by abnormal higher IPO’s frequency, high abnormal underpricing rate, and stock’s oversubscription. Under this condition  investors become more optimist and become an advantage for companies to get external funds through IPO’s, but in secondary market stock price will be corrected naturally and it’s long term performance oftenly worst than non-IPO’s company. This is what so called as long-run underperformance. This study use underpriced IPO’s stocks in Bursa Efek Indonesia for period 2012 to 2015 as sample and use e-views 7 to analyze it. The result shows that only DER don’t have effect significant to Y1, only Auditor Reputation and Gross Proceeds variables don’t have significant effect to Y2 and finally  Y1 have significant effect to Y3. R-squared shows for Y1,Y2 and Y3 indicates that still many independent variables gives significant effects to Y1 and Y2. 

scholarly journals Bookbuilding e Alocação Estratégica: Evidência do Mercado Brasileiro de Ações

2006 ◽  
Vol 4 (1) ◽  
pp. 33
Author(s):  
Richard Saito ◽  
José André C. M. Pereira
Keyword(s):  
Initial Public Offerings ◽  
Strong Evidence ◽  
Seasoned Equity Offerings ◽  
Secondary Market ◽  
Discretionary Power ◽  
Equity Offerings ◽  
Investment Bank ◽  
Public Offerings ◽  
Allocation Criteria

We examine four bookbuilding processes on the Brazilian stock market executed by an investment bank from 2003 to 2004. In a bookbuilding process, the investment bank has the discretionary power in pricing and in allocating shares to investors. We analyze the allocation determinants and we find empirical evidence that bookbuilding does induce investors to disclose superior information. However there is strong evidence that issues related to majority controlling position, liquidity on secondary market, and flipping activities impact on allocation criteria. We find differences between allocation determinants derived from (a) initial public offerings and (b) seasoned equity offerings, but in both cases there is a tendency to favor long term investors.

Industry-Average Earnings Management and IPO Pricing

2019 ◽  
Vol 22 (04) ◽  
pp. 1950023
Author(s):  
Joseph R. Rakestraw ◽  
Raman Kumar ◽  
John J. Maher
Keyword(s):  
Earnings Management ◽  
Initial Public Offerings ◽  
Secondary Market ◽  
Share Price ◽  
Partial Adjustment ◽  
Public Offerings ◽  
Initial Return ◽  
Ipo Pricing

We examine the effects of signed industry-average earnings management on the pricing of initial public offerings (IPOs). We posit that the variation in an IPOs earnings management is related to industry-average earnings management and, therefore, provides useful information regarding the IPO valuation. We find that higher industry-average earnings management negatively affects the pre-issuance price update and the initial return of IPOs. Our findings lend support to the partial adjustment phenomenon of IPO pricing which suggests information that influences valuation is partially incorporated in the initial offer price and more fully incorporated in the share price during the first-day of secondary market trading.

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