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1 – 10 of over 4000Anlin Chen, Li‐Wei Chen and Lanfeng Kao
The purpose of this paper is to examine the long‐run performance of initial public offerings (IPOs) in Taiwan with a five‐factor model on a calendar time basis.
Abstract
Purpose
The purpose of this paper is to examine the long‐run performance of initial public offerings (IPOs) in Taiwan with a five‐factor model on a calendar time basis.
Design/methodology/approach
Besides the Fama‐French three factors, the paper also incorporates leverage and liquidity into the factor model to measure IPO five‐year performance. The sample consists of 261 IPOs issued in Taiwan over‐the‐counter during 1991 and 2002. The actual data cover the period from January 1991 to December 2007.
Findings
Contrary to findings of previous studies on US IPO markets, the paper finds that Taiwan IPOs experience better long‐run performance than the market even after adjusting for the common factors in the capital markets.
Originality/value
This paper argues that survival rate of Taiwan IPOs would be the reason why Taiwan IPOs do not underperform in the long run.
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Giancarlo Giudici and Peter Roosenboom
In this chapter we investigate whether the pricing of IPOs on Europe’s new stock market differs from that of IPOs on main market segments. We report a 22.3 percentage point…
Abstract
In this chapter we investigate whether the pricing of IPOs on Europe’s new stock market differs from that of IPOs on main market segments. We report a 22.3 percentage point difference in the average first-day return of new market IPOs (34.3%) and the average first-day return of main market IPOs (12%). We show that reduced incentives to control wealth losses and different firm and offer characteristics partially explain the higher average first-day return on new market segments. We also find that the bundling of IPO deals has been more important to control underpricing costs on new market than on main market segments.
Start-ups are successful in receiving valuation in billions of US dollars prior to initial public offering (IPO). However, to sustain higher valuation, the stocks need to perform…
Abstract
Purpose
Start-ups are successful in receiving valuation in billions of US dollars prior to initial public offering (IPO). However, to sustain higher valuation, the stocks need to perform consistently after the IPO. Short-run stock performance of India-based start-ups during the first year of IPO listing from March 2021 to March 2022 is analysed.
Design/methodology/approach
The paper deals with the new generation start-ups' stock performance in emerging market in terms of total and abnormal return generated in comparison to the market (NIFTY-200). Further, the volatility of returns during bear and bull regimes is analysed through a family of Markov-switching GARCH models using both normal and skewed distributions.
Findings
The results suggest that start-up stocks are more volatile during bear regime than in the bull run in market-based economies where price limit policy does not apply. Besides, the cumulative abnormal return over the market return was lower for majority of start-up IPO stocks.
Social implications
Though negative returns of the start-up stocks during the first year of IPO need not be surprising, higher volatility during bear regime is a matter of concern as it could severely impact retail investors and founders. The results hold implication for IPO regulation in emerging markets and for retail investors desirous of investing in start-up stocks.
Originality/value
Volatility of return is examined using a state-space model during the first year of the start-up IPO listing. The study contributes to the emerging market IPO literature by examining IPO performance in market-based economy. Previous IPO performance studies in emerging markets are predominantly based on ecosystems where start-ups are subjected to price limit policy, and it does not reflect the true nature of IPO performance across emerging markets.
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Vivek Sah and Philip Seagraves
The purpose of this paper is to consider the operating performance of real estate investment trust initial public offerings (REIT IPOs) as a measure to find additional evidence of…
Abstract
Purpose
The purpose of this paper is to consider the operating performance of real estate investment trust initial public offerings (REIT IPOs) as a measure to find additional evidence of market timing in this sector.
Design/methodology/approach
A sample of REIT IPOs is analyzed to determine the relationship between IPO clustering and several measures of REIT operating performance.
Findings
The results suggest that timing the market by marginal firms in the REIT sector would be difficult, due to the transparent nature of REITs, leading to lower level of informational asymmetry between REIT managers and investors. Consistent with results found for non‐REIT firms in industry clusters, no evidence was found of a significant difference between the operating performance of REITs which are part of an IPO cluster and those that went public outside of the identified cluster periods.
Practical implications
This study shows that REIT market is efficient and would not allow REIT managers to time the market.
Originality/value
Using stringent measures of identifying REIT IPO clusters and operating performance as a measure to gauge market timing, this study differs from previous studies and provides additional and robust evidence of transparent nature of REITs that leads to reduced information asymmetry between managers and investors. This result supports the theory that REITs are more transparent and thus less likely to be over‐invested during IPO cluster periods.
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This paper aims to investigate whether real estate investment trust (REIT) initial public offerings (IPOs) are exposed to abnormal initial-day performance. Previous studies have…
Abstract
Purpose
This paper aims to investigate whether real estate investment trust (REIT) initial public offerings (IPOs) are exposed to abnormal initial-day performance. Previous studies have predominantly focused on REITs listed in the USA and Australia, only a few studies have utilised a multi-country approach and only one study has used a multi-region approach. This paper adds to the literature by, for a global sample, analysing variables proven important in explaining REIT IPO performance but never used in a global sample before by extending the investigation of initial-day return patterns for new REIT types and by offering the first insights from emerging REIT markets.
Design/methodology/approach
Initial-day raw and abnormal returns were calculated for a sample of 445 IPOs in 26 countries over the period from 1996 to 2014. The returns were partitioned according to a select set of themes and multiple regression analysis was used to isolate the relationship between the explanatory factors and underpricing.
Findings
For the sample as a whole, the mean initial-day raw return is 3.94 per cent and the mean market-adjusted initial-day return is 4.01 per cent. Even though the initial-day return for a REIT IPO typically is positive, negative mean returns are observed for a few countries and during certain years. Investors should note that for European markets, new property type exhibited a robust positive association with abnormal return, and underwriter reputation exhibited a robust negative relationship with abnormal return.
Originality/value
This paper fulfils the need to test important concepts on global REIT IPO markets.
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Cheedradevi Narayanasamy, Mamunur Rashid and Izani Ibrahim
The purpose of this paper is to bridge the gap between the theory underlying divergence of opinion (DOP) and a cognitive concept termed as attention by specifically focussing on…
Abstract
Purpose
The purpose of this paper is to bridge the gap between the theory underlying divergence of opinion (DOP) and a cognitive concept termed as attention by specifically focussing on the volume and price behaviour in initial public offering (IPO) settings.
Design/methodology/approach
Employing the hierarchical regression for a sample of 282 Malaysian fixed price IPOs issued from 2004 to 2014, this research investigated the effect of investors’ attention on other information that complements the information revealed by initial return on DOP. Measure of market adjusted turnover (AbTO) from non-IPO setting was used to capture the DOP in the after-market, while investors’ attention was on a dichotomise scale variable which was captured by the increase/decrease of the Google search index (GOGC2) on the month of listing compared to a month prior to listing.
Findings
The findings indicate that attention moderates the relationship between initial return (also surrogates underpriced IPOs) and DOP. The findings suggest that disagreement to initial returns is reduced, while liquidity in the after-market is promoted, when investors pay more attention to other information that complements price change. The findings also indicate that behavioural tendency is less when individual participation is weak.
Research limitations/implications
This paper highlights the importance of interaction effects in explaining the behavioural tendency in the after-market.
Practical implications
The weak individual investors’ participation and greater attention reduce the market inefficiency in Malaysia.
Originality/value
The finding is consistent with the view that the level of individual investors’ participation and information disclosure requirements has an implication on behavioural bias, which affects DOP in the after-market.
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Vikas Gupta, Shveta Singh and Surendra S. Yadav
The unique regulatory design of India provides us with the opportunity to disaggregate traditional initial public offering (IPO) underpricing into three categories: voluntary, pre…
Abstract
Purpose
The unique regulatory design of India provides us with the opportunity to disaggregate traditional initial public offering (IPO) underpricing into three categories: voluntary, pre-market and post-market. The presence of anchor investors in India makes it a compelling case to study. These individuals were introduced to bring transparency in the book building process, but their impact on pre-market and post-market underpricing was not foreseen. Therefore, the purpose of this paper is to evaluate the impact of anchor investors on the IPO underpricing after disaggregation and on the long-run performance of an IPO.
Design/methodology/approach
A sample covering 232 IPOs from a period of 2009–2018 is included. The empirical analysis explores the impact of various firm-specific as well as market-specific variables on IPO underpricing. The financial data for the empirical analysis are extracted from Prime database and websites of National Stock Exchange and Bombay Stock Exchange. To deal with the outliers effectively, this paper deploys “robust-regression.”
Findings
The study finds that investor’s subscription rate and voluntary underpricing impacts the pre-market but do not have any impact on the post-market while the age of the firm has a different impact on both the markets and the number of anchor investors have the same impact in both markets. Anchor investors’ participation increases the pre-market as well as post-market underpricing. Lastly, the long-term performance of IPOs backed by the anchor investors is high relative to the IPOs not subscribed to by the anchor investors.
Originality/value
This paper is believed to be the first attempt to study the impact of anchor investors on the disaggregated IPO underpricing. The findings of this study will have a great insight for the investors.
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Mehmet F. Dicle and John Levendis
The purpose of this paper is to hypothesize two channels in which market volatility affects initial public offering (IPO) activity.
Abstract
Purpose
The purpose of this paper is to hypothesize two channels in which market volatility affects initial public offering (IPO) activity.
Design/methodology/approach
First, CEOs time the market for IPOs and volatility makes this decision process harder. Second, risk-averse IPO investors become more reluctant toward IPOs during periods of higher volatility for their after-IPO returns.
Findings
The authors provide evidence that higher market volatility leads to lower IPO activity, supporting these hypotheses. More importantly, the authors show that it is not the realized volatility, but rather the implied (expected) volatility, that causes lower IPO activity.
Research limitations/implications
While there may be many companies that are ready to have IPOs, they may be simply waiting for a more opportune time which may not necessarily be a period of high prices but of low volatility.
Practical implications
The public policy prescription is clear: if IPOs are to be encouraged, then regulatory policies should be constructed with the aim of reducing volatility.
Originality/value
This study is the first (to the authors’ knowledge) to argue that it is not the realized volatility which most affects the IPO decisions of executives, entrepreneurs and investors.
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Theo Freybote, Nico Rottke and Dirk Schiereck
The purpose of this paper is to provide evidence for the ongoing significant underpricing of European property IPOs.
Abstract
Purpose
The purpose of this paper is to provide evidence for the ongoing significant underpricing of European property IPOs.
Design/methodology/approach
The paper provides recent evidence on underpricing for a comprehensive data set of 105 IPOs of European property companies. It starts with an overview of evidence and explanations for the underpricing of property IPOs and evidence for the cyclical nature of IPO activity. It then goes on to describe the methodology and data collection process. The results on initial returns are summarised.
Findings
The paper finds that the current IPO market for property shares has been shown to be hot according to common definitions. Additionally, it is safe to say that the hot property securities market has caused to some extent a hot IPO market with property indices averaging 10.69 per cent during the 100 days prior to the IPO compared to 4.65 per cent for the general equity market indices. However, the recovery in Western European property markets and lack of quality property stock in Eastern European countries has created a large financing need for property companies which can be met by going public. Thus, supply side aspects are more likely than market‐timing characteristics to be the major driver behind the current hot IPO market.
Originality/value
The paper provides evidence for an ongoing significant underpricing of European property IPOs and offers an explanation for why it is appropriate to classify the property stock market as a hot market.
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Kulabutr Komenkul and Dhanawat Siriwattanakul
The purpose of this paper is to investigate the characteristics of the Initial Public Offering (IPO) market, IPO underpricing and the long-run performance of IPOs and to find out…
Abstract
Purpose
The purpose of this paper is to investigate the characteristics of the Initial Public Offering (IPO) market, IPO underpricing and the long-run performance of IPOs and to find out the ex ante difference in the market structure between the pre-, during and post-periods of the Unremunerated Reserve Requirement (URR) at the 30 per cent rate.
Design/methodology/approach
The sample is a total of 245 IPOs listed on the Stock Exchange of Thailand (SET) and the Market for Alternative Investment (mai), during the period 2001-2012. The explanatory variables consist of the age of the firm, the offer size, the time-lag between the IPO date and the first trading date, the proportion of shares owned by the government and the IPO subscription rates by foreign and institutional investors. In further analysis, the authors adopt a two-stage least squares approach to derive unbiased estimates of the relationship between government ownership, IPO underpricing and firm quality.
Findings
We find the ex ante uncertainty and earning management partially explain the IPO underpricing phenomenon in the Thai IPO market. Our findings support the impresario hypothesis shown by the negative relation between underpricing and the three-year after-market. In addition, the 30 per cent URR imposition by the Thai Central Bank promptly reduced the number of IPO issues and the proportion of foreigners and institutions subscribing to IPOs. However, it was able to enhance the degrees of IPO underpricing and the long-run performance of IPOs in Thailand.
Practical implications
The results presented in this paper may be, therefore, useful for investors, security analysts, companies and regulators in many other emerging markets beyond Thailand. Given the results from the over-performance of IPOs in the post-URR period, investors may do better holding Thai IPOs for a long period with a likelihood of gaining a higher return.
Originality/value
This paper contributes to the literature concerning IPOs – in that we have considered two stock markets, namely, SET and mai. Furthermore, unique data such as the government ownership and proportion of IPOs subscribed by foreign and institutional investors are taken into consideration in our research model. To the best of our knowledge, for the first time in the Thai IPO market, the effect of the 30 per cent URR on IPO underpricing and the performance of IPOs in the long-run has been closely examined.
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