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.

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.

Earnings Management and the Pricing of Initial Public Offerings

2007 ◽  
Vol 10 (04) ◽  
pp. 541-559 ◽  
Author(s):  
Kyoko Nagata ◽  
Toyohiko Hachiya
Keyword(s):  
Earnings Management ◽  
Initial Public Offerings ◽  
Initial Public Offering ◽  
Ipo Underpricing ◽  
Earnings Growth ◽  
Public Offerings ◽  
Public Offering

This study investigates whether the extent of earnings management has any impact on offer price in initial public offering (IPO). Using a sample of 581 JASDAQ IPO firms, we find that offer price reflects earnings management to some extent. Firms with conservative earnings management tend to have higher offer prices, and firms managing earnings aggressively tend to be discounted when they fail to exhibit smooth earnings growth. These results are consistent with the hypothesis that underwriters adjust for the effect of earnings management to appropriately pricing the issues. Overall, our evidence could lead to another explanation for IPO underpricing.

scholarly journals Board financial expertise and IPO performance: An analysis of U.S. public offerings and withdrawals

2021 ◽  
Vol 18 (3, special issue) ◽  
pp. 307-324
Author(s):  
Marvin Nipper
Keyword(s):  
Information Asymmetry ◽  
Initial Public Offerings ◽  
Initial Public Offering ◽  
Comprehensive Analysis ◽  
Outside Directors ◽  
Public Offerings ◽  
Ipo Performance ◽  
Financial Expertise ◽  
Public Offering ◽  
Do So

Potential investors examine governance characteristics prior to an initial public offering (IPO) to assess the quality and prospects of the issuing firm. One important governance characteristic is board financial expertise, as it provides directors with the relevant knowledge for an IPO process and is valuable for the board’s monitoring duties. Therefore, the purpose of this paper is to examine whether and how board financial expertise affects IPO outcomes. To do so, I employ a sample of 414 completed and 85 withdrawn IPOs that were filed from 2014–2017 at NYSE or NASDAQ. I document that the ratio of directors with financial expertise on the board is negatively associated with the level of underpricing and the probability of IPO withdrawal. The results suggest that particularly outside directors with financial expertise have a positive signaling effect and help to reduce information asymmetry around initial public offerings. Above that, using quantile regression, I find that director financial expertise is most valuable for issuances with high levels of investor uncertainty. Therefore, this study makes important contributions to the corporate governance and IPO literature by providing a comprehensive analysis of the effects of board financial expertise on IPO outcomes

Survival of Initial Public Offerings on Europe’s New Stock Markets

2018 ◽  
pp. 533-558 ◽  
Author(s):  
Tao Jiao ◽  
Peter Roosenboom ◽  
Giancarlo Giudici
Keyword(s):  
Initial Public Offerings ◽  
Initial Public Offering ◽  
Stock Markets ◽  
Early Stage ◽  
High Growth ◽  
Barriers To Entry ◽  
Main Hypothesis ◽  
Public Offerings ◽  
Similar Survival ◽  
Public Offering

Nearly 20 competing new stock markets opened their doors in 12 Western European countries during 1995–2005. These stock markets copied the NASDAQ model, with low barriers to entry and tight disclosure rules, and had one common aim—to attract untested, early stage, innovative, and high-growth small and medium-sized enterprises (SMEs). The main hypothesis of this chapter is that by setting the entry barriers too low, these new markets risked attracting too many low-quality firms, creating a “lemons problem” that negatively impacted the survival prospects of all firms listed on that market. The key finding is that the initial public offering (IPO) firm failure on six of these new stock markets is almost double the IPO firm failure on long-established official stock markets with more stringent listing requirements. The exception is the unregulated Alternative Investments Market, where firms have similar survival prospects compared to companies listing on London’s Official List.

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.

The Relationship between Boards of Directors and Initial Public Offerings in the Biotechnology Industry

1998 ◽  
Vol 22 (3) ◽  
pp. 5-29 ◽  
Author(s):  
Todd A. Finkle
Keyword(s):  
Initial Public Offerings ◽  
Initial Public Offering ◽  
Boards Of Directors ◽  
Biotechnology Industry ◽  
Public Offerings ◽  
Biotechnology Firms ◽  
The Board Of Directors ◽  
And Performance ◽  
Public Offering ◽  
Performance Results

Utilizing the entire population of public biotechnology firms from 1980-1994, three models were tested to determine If a relationship exists between the size and composition of the board of directors and performance. Results indicate significant positive relationships between director expertise and the size of a firm's initial public offering. Going public during hot markets and larger firms were also related to larger Initial public offerings. These findings will benefit practitioners in the formation of boards within the biotechnology Industry. Managers of firms within the biotechnology industry who are contemplating a public offering will be able to proactively address the composition of their boards.

INITIAL PUBLIC OFFERINGS AND PRE-IPO SHAREHOLDERS: ANGELS VERSUS VENTURE CAPITALISTS

2012 ◽  
Vol 17 (04) ◽  
pp. 1250022 ◽  
Author(s):  
WILLIAM C. JOHNSON ◽  
JEFFREY E. SOHL
Keyword(s):  
Initial Public Offerings ◽  
Initial Public Offering ◽  
Early Stage ◽  
Equity Capital ◽  
Venture Capitalists ◽  
Public Offerings ◽  
Corporate Investors ◽  
Public Offering ◽  
Angel Investors

At the time of an initial public offering, shares in a firm are typically held by venture capitalists, insiders, corporate investors and angel investors. We examine the role of angel investors in the IPO process. We find that angel investors provide equity capital in industries venture capitalists are less likely to serve and that shareholders in angel backed IPO firms are more likely to sell their shares at the time of the offering. Where venture capital backed IPO firms have higher underpricing, angel backed IPO firms do not, implying that angels may be the preferred investors for early-stage firms.

Assessing the Impact of Customer Concentration on Initial Public Offering and Balance Sheet–Based Outcomes

2017 ◽  
Vol 81 (6) ◽  
pp. 42-61 ◽  
Author(s):  
Alok R. Saboo ◽  
V. Kumar ◽  
Ankit Anand
Keyword(s):  
Initial Public Offerings ◽  
Initial Public Offering ◽  
Balance Sheet ◽  
Performance Outcomes ◽  
Customer Relationships ◽  
Negative Effects ◽  
Public Offerings ◽  
Prior Literature ◽  
Public Offering ◽  
The Impact

Using the notion of customer concentration, the authors argue that firms should evenly spread their revenues across their customers, rather than focusing on a few major customer relationships. Prior literature suggests that major customers improve efficiency and provide access to resources, thereby producing positive performance outcomes. However, building on industrial organizational literature and modern portfolio theory, the authors argue that concentration of revenues reduces the supplier firm's bargaining power relative to its customers and hurts the ability of the supplier firm to appropriate value, which, in turn, hurts profits. Using a sample of 1,023 initial public offerings (IPOs) and robust econometric methods, they find that customer concentration reduces investor uncertainty and positively impacts IPO outcomes, but significantly hurts balance sheet–based outcomes (e.g., profitability). The results suggest that a 10% increase in customer concentration reduces profitability by 3.35% (or about $7 million) in the subsequent year, or 9.4% cumulatively over the next four years (or about $20.32 million). Further, the authors find that the negative effects of customer concentration decrease with increase in organizational (marketing, technological, and operational) capabilities and increase with low customer credit quality.

scholarly journals CAN ACCOUNTING INFORMATION ACT AS A PROXY FOR EX ANTE UNCERTAINTY IN INITIAL PUBLIC OFFERINGS?

2003 ◽  
Vol 5 (2) ◽  
pp. 249 ◽  
Author(s):  
Tatang Ary Gumanti
Keyword(s):  
Empirical Evidence ◽  
Initial Public Offerings ◽  
Initial Public Offering ◽  
Accounting Information ◽  
Firm Risk ◽  
Public Offerings ◽  
Accounting Numbers ◽  
Ex Ante ◽  
Value Of Firm ◽  
Public Offering

This paper reviews and summarizes previous works and the rationale for the proposition that accounting information is in fact value relevant in the determination of an initial public offering IPO).Theoretical and empirical evidence has indicated that certain accounting measures can he used as proxies for total firm risk, that is, they could determine the riskiness of a corporation. The literature also advocates that accounting information is relevant in determining the value and thus the riskiness of a corporation through the use of accounting analysis. Since most of the information available in the prospectus is accounting information, it is arguable that this information represents a potential source for assessing the issuing firm. Some scholars have also advocated the possibility of using accounting information in assessing the value of firm making an IPO. Numerous papers have provided analytical and empirical evidence of the association between accounting numbers and the value of IPOs. The conclusion generally comes to show that information in the prospectus is value relevant concerning the IPO. The paper shows that it is indeed an arguable to use accounting information in the valuation of an IPO. Accordingly, it is an empirical issue whether accounting information has the property in explaining the ex-ante uncertainty of an IPO.

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