scholarly journals Determinants of underpricing initial public offerings (IPOs) of BRICS companies

2021 ◽  
Vol 2 (3) ◽  
pp. 83-106
Author(s):  
Afik Gasymov ◽  
Svetlana Makarova
Keyword(s):  
Empirical Study ◽  
Initial Public Offerings ◽  
World Bank ◽  
Gdp Growth ◽  
Short Term ◽  
Public Offerings ◽  
Brics Countries ◽  
Price Range ◽  
Common Stocks ◽  
Big Four

The purpose of this article is to identify the nature of the influence of crucial factors on the short-term underpricing of initial public offerings of common stocks of companies in the BRICS countries. Based on a sample of 1,141 companies from the BRICS countries that conducted IPOs (using Bloomberg and World Bank databases), we tested the influence of decisive factors on the underpricing of the shares of these companies. The empirical study is based on testing OLS models for different periods: for the period 2001–2018 and separately for the periods 2001–2008 and 2010–2018. The study shows that, firstly, with an increase in the volume of the placement of shares, their underestimation in an IPO decreases. In addition, having an auditor from the Big Four also reduces the underestimation of shares. Secondly, we revealed that the underpricing of shares in the course of the IPO increased with GDP growth. Besides, if companies place their shares on a foreign exchange, the underestimation of their shares increases. At the same time, such IPO parameters as the number of underwriters, the reputation of underwriters, and the deviation of the offer price from the middle of the price range during the placement period do not affect the underestimation of shares for companies from the BRICS countries. Taking into account the results of an empirical study, the article formulates recommendations for improving the efficiency of initial public offerings for companies from the BRICS countries.

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.

IPOs in New Zealand

2018 ◽  
pp. 591-620
Author(s):  
Huong Dang ◽  
Michael Jolly
Keyword(s):  
New Zealand ◽  
Initial Public Offerings ◽  
Stock Exchange ◽  
Short Term ◽  
Public Offerings ◽  
Sales Forecast ◽  
Average Return ◽  
Book To Market Ratio ◽  
One Year

This chapter examines the performance of 96 initial public offerings (IPOs) listed on New Zealand Stock Exchange (NZSX) during the 25-year period from July 1991 to June 2015. The NZX Gross All Index and two portfolios of matched peers based on sector/industry and either sales forecast or book-to-market ratio are constructed as benchmarks. Compared with three benchmark portfolios, IPO firms outperform in the short term (one year) but underperform in the medium- and long-term investment horizons (three to five years). The authors conduct three subsample analyses to examine the association between differences in valuation multiples (E/P, EBITDA/EV, and P/S) and long-term returns. The findings are consistent with the general consensus of superior returns from value investments: IPOs with above-median earnings ratio (E/P and EBITDA/EV) and below-median P/S exhibit higher cumulative average return (CAR) than IPOs with below-median earnings ratio and above-median P/S.

Underpricing in Initial Public Offerings: The Indian Evidence

1997 ◽  
Vol 22 (4) ◽  
pp. 17-30 ◽  
Author(s):  
T P Madhusoodanan ◽  
M Thiripalraju
Keyword(s):  
Initial Public Offerings ◽  
Stock Markets ◽  
Short Term ◽  
Public Offerings ◽  
Long Run ◽  
The Impact

Underpricing in the initial public offerings (IPOs) is a well documented phenomenon in the stock markets. In this paper T P Madhusoodanan and M Thiripalraju analyse the Indian IPO market for the short-term as well as long-term underpricing. They also examine the impact of the issue size on the extent of underpricing in these offerings and the performance of the merchant bankers in pricing these issues. The study indicates that, in general, the underpricing in the Indian IPOs in the shortrun was higher than the experiences of other countries. In the long-run too, Indian offerings have given high returns compared to negative returns reported from other countries. The study also reveals that none of the merchant bankers showed any better pricing capabilities.

scholarly journals Evidence of Underpricing of Initial Public Offerings in Vietnam

2013 ◽  
Vol 217 ◽  
pp. 74-91
Author(s):  
LÝ TRẦN THỊ HẢI ◽  
KHA DƯƠNG
Keyword(s):  
Regression Model ◽  
Initial Public Offerings ◽  
State Ownership ◽  
Short Term ◽  
Market Conditions ◽  
Public Offerings ◽  
Two Factors ◽  
Starting Price

This study was conducted to find evidence of short-term underpricing of initial public offerings (IPOs) and factors that explain the level of underpricing based on IPO samples in the period between January 2005 and July 2012 in Vietnam. The authors found certain evidence to support the underpricing, with the underpricing rate set at 38% and 49%. Having bootstrapping regression model employed, the results showed that the two factors ? the exceeding purchase ratio and the starting price of the auctions ? negatively correlated as expected with underpricing rate while impact of market conditions appeared relatively weak. Other factors such as size, listing lateness, company age, state ownership after IPOs did not correlate with the underpricing levels in Vietnam

Early wealth effects of regional ADRs

2015 ◽  
Vol 11 (2) ◽  
pp. 198-214 ◽  
Author(s):  
Mark Schaub
Keyword(s):  
Initial Public Offerings ◽  
Latin American ◽  
Seasoned Equity Offerings ◽  
Wealth Effects ◽  
Equity Offerings ◽  
Short Term ◽  
Content Type ◽  
Public Offerings ◽  
Market Index ◽  
The Us

Purpose – The purpose of this paper is to determine what types of short-term wealth effects accrued to European and Latin American American Depository Receipt (ADR) investors and whether these were affected by the type of issue (initial public offerings (IPO) vs seasoned equity offerings (SEO)) or the date of issue (1990s vs 2000s). Design/methodology/approach – Standard ADR and IPO excess return methodology is utilized to compute and test excess returns against a US investment benchmark. This methodology is used in many ADR and IPO studies. Findings – European SEOs listed in the 2000s did better than those listed in the 1990s. The results for European IPOs were the opposite. Latin American SEOs did better relative to the US market index for issues listed in the 1990s as compared to those listed in the 2000s. Once again the results for Latin American IPOs were the opposite. Originality/value – This study differs from previous studies by emphasizing differences in short-term return behaviour for Latin American and European ADRs listed during a decade of US market stability (the 1990s) vs those listed in the 2000s when the US stock market encountered times of extreme return volatility. These timing differences affect not only the returns of all the ADRs but also show how ADR IPOs and SEOs tend to have opposite return behaviour based on timing. These return differences are important because the major benefits of portfolio diversification are achieved when asset returns are less correlated with each other.

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