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Article
Publication date: 30 March 2021

Yuxin Wang and Guanying Wang

The purpose of this paper is to explore how the price limit policy implemented in 2014 affects initial public offering (IPO) underpricing and long-term performance in China.

Abstract

Purpose

The purpose of this paper is to explore how the price limit policy implemented in 2014 affects initial public offering (IPO) underpricing and long-term performance in China.

Design/methodology/approach

The data are the IPOs from Shanghai Stock Exchange (SSE) and Shenzhen Stock Exchange (SZSE) between 2004 and 2018. The data are firstly divided into the IPOs before the price limit policy and the IPOs after the price limit policy according to the time of issuance. Then the two groups are divided into 4 subsamples according to the market blocks and the P/E ratio. The authors use multiple regression models to explore the effect of price limit policy in each subsample.

Findings

The first-day price limit system for IPOs is similar to the upward fuse mechanism, the purpose of which is to suppress IPO underpricing. However, this study finds that the policy does not suppress IPO underpricing, but increases the underpricing rate in all subsamples. Besides, the long-term performance in each subsample is different from each other. Main Board stocks’ long-term performance is worse after the policy. The policy makes Small and Medium Enterprise Board (SME Board) and Growth Enterprise Market Board (GEM Board) stocks with high P/E ratios perform better in the long term. For SME Board and GEM Board stocks with low P/E ratios, the policy makes no significant effect.

Practical implications

Good policy intentions may sometimes lead to counterproductive effects. However, since the long-term performance of each subsample is different, it is difficult to judge whether the policy should continue to be implemented or cancelled. Implementing different policies for different subsamples may be a better way to solve this problem.

Originality/value

This paper contributes to the study of IPO underpricing and long-term performance from the perspective of price limit policy.

Details

Managerial Finance, vol. 47 no. 9
Type: Research Article
ISSN: 0307-4358

Keywords

Book part
Publication date: 21 July 2005

Kay-Yut Chen

Companies are starting to capitalize on the potential of experimental economics as a decision-making tool. Hewlett-Packard (HP) is one of such pioneering companies. Experiments…

Abstract

Companies are starting to capitalize on the potential of experimental economics as a decision-making tool. Hewlett-Packard (HP) is one of such pioneering companies. Experiments, conducted at HP Labs, were used to test retailer contract policies in three areas: return, minimum advertised-price (MAP), and market development funds. The experimental design models the multifaceted contemporary market of consumer computer products. While the model is quite complex, participants were found to be effective decisions-makers and that their behavior is sensitive to variations in policies. Based on the experimental results, HP changed its policies; for example, it made the consequences for minimum advertisement price violations forward-looking as well as backward-looking. This line of research appears promising for complex industrial environments. In addition, methodological issues are discussed in the context of differences between business and academic economics experiments. Finally, the author speculates about potential future business applications.

Details

Experimental and Behavorial Economics
Type: Book
ISBN: 978-0-76231-194-1

Article
Publication date: 20 February 2017

Juan Tao, Wu Yingying and Zhang Jingyi

The purpose of this paper is to re-examine the effectiveness of price limits on stock volatilities in China over a more recent time period spanning from 2007 to 2012. The…

Abstract

Purpose

The purpose of this paper is to re-examine the effectiveness of price limits on stock volatilities in China over a more recent time period spanning from 2007 to 2012. The motivation stems from the fact that very high stock market volatilities are observed in China and we are sceptical of the volatility mitigating effect claimed by advocates of price limits.

Design/methodology/approach

The effectiveness of price limits on volatilities is examined using an event study methodology and within an expanded framework of volatility-volume relationships. The sample stocks include the 300 component stocks of the CSI300 Index.

Findings

Both event study and regression analysis suggest that price limits exaggerate market volatilities by causing volatility spillovers. The destabilising effect is much more pronounced for small firm stocks and when the market falls. In addition to the informational source of volatilities (represented by volume), price limits create another non-trivial frictional source of volatilities in China’s stock market.

Originality/value

This research is the first to re-examine the price limit effect in China’s stock market in an expanded framework of volatility-volume relationships. It identifies price limits, in addition to information, as another non-trivial frictional source of volatilities. The findings derived from a recent sample period confirm the conventional view of inefficiency of price limits raised by Fama (1989) and provide evidence in support of the pervasive trend of stock market deregulations.

Details

China Finance Review International, vol. 7 no. 1
Type: Research Article
ISSN: 2044-1398

Keywords

Article
Publication date: 25 July 2023

Khanindra Ch. Das

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.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

Keywords

Article
Publication date: 20 January 2020

Amita Majumder, Ranjan Ray and Sattwik Santra

This study aims to apply a proposed methodology for calculating spatial prices in a heterogeneous country setting such as India with limited price information. Based on the…

Abstract

Purpose

This study aims to apply a proposed methodology for calculating spatial prices in a heterogeneous country setting such as India with limited price information. Based on the empirical evidence, the study plans to draw the spatial price map of India with different colours denoting states and districts with varying level of spatial prices.

Design/methodology/approach

This study shows that a procedure proposed by Lewbel (1989), based on the idea by Barten (1964) that household composition changes have “quasi-price effects”, can be used to estimate spatial prices in the absence of information on regional prices.

Findings

The evidence on spatial price differences in India, which is the most comprehensive to date because it goes down to district level, shows that the proposed procedure has considerable potential in future applications on other data sets with limited price information. The policy importance of the results is underlined by the sensitivity of the demand elasticities to the inclusion/omission of spatial price variation.

Research limitations/implications

The study uses “pseudo unit values” based on household composition and demographic effects on demand as proxy for the missing price information. While the work of Atella et al. (2004) suggests that such proxies are accurate representations of true prices, nevertheless, they are proxies and the results should be treated with caution.

Practical implications

The evidence on spatial prices in India that point to a high degree of price heterogeneity between regions implies that welfare applications such as income distributional and poverty studies must take account of the price heterogeneity within the country. The implications extend beyond India to cross-country exercises such as the purchasing power parity calculations undertaken by the International Comparison Project.

Originality/value

This is one of the first studies that provide evidence on spatial price heterogeneity within a country without requiring regional price information. Methodologically, the paper builds on the suggestion of Lewbel (RES, 1989) in showing how the demographic effects on household expenditure pattern can be used to estimate spatial prices. The value of the contribution lies in the use that the estimated spatial prices can be put to in calculating inequality and poverty rates and in standard of living comparisons between regions in the country.

Article
Publication date: 8 January 2018

Jamal Mousa Shamieh, Ihab Hanna Sawalha, Amer Z. Salman, Emad K. Al-Karablieh, Mohammad A. Tabieh, Hussain F. Al-Qudah and Osama O. Jaara

The purpose of this paper is twofold: first, to estimate the water demand elasticities using a parametric linear programming (LP) model to provide an insight into the accurate and…

Abstract

Purpose

The purpose of this paper is twofold: first, to estimate the water demand elasticities using a parametric linear programming (LP) model to provide an insight into the accurate and flexible pricing policy of irrigation water in the Jordan Valley; and second, to highlight key risk aspects, related to water demand, which are likely to impact the community.

Design/methodology/approach

A parametric LP model was used in this research. Primary and secondary data were collected.

Findings

Results revealed that the demand elasticity is high in Spring and Summer than in Fall and Winter, meaning that during Spring and Summer farmers are willing to forgo larger amounts of water than in other months. This is because of areas planted during Spring seasons are much less than those of Autumn and Winter.

Practical implications

The Jordan Valley suffers from water scarcity risk, and consequently the area to be planted is not fully utilized, leading to lower cropping intensities. Responsible authorities in Jordan need to address these issues and propose proper solutions in order to reduce further escalation of this risk and subsequent impact on local communities. Insight into the value of water demand elasticities is essential to support and mitigate policy decision making under risk conditions, concerning investments in water supply systems; investments in the water distribution and irrigation systems; efficient allocation of water with competing sectors; setting water pricing and tariffs; setting cost recovery mechanisms, and the risks encountered under lack of mitigated policy decision making.

Originality/value

This is one of few studies that addresses in detail using a parametric LP model the issue of water scarcity, related risks and subsequent impact on society in Jordan. It is expected to help policy and decision makers better formulate future estimates and demand which subsequently reduce related risks.

Details

Management of Environmental Quality: An International Journal, vol. 29 no. 1
Type: Research Article
ISSN: 1477-7835

Keywords

Article
Publication date: 10 August 2021

Zonghuo Li, Wensheng Yang and Yinyuan Si

This paper investigates a dual-channel supply chain in which a manufacturer offers coupons in the online channel and the retailer in the offline channel. The optimal pricing and…

Abstract

Purpose

This paper investigates a dual-channel supply chain in which a manufacturer offers coupons in the online channel and the retailer in the offline channel. The optimal pricing and coupon promotion policies are explored, and the brand image under different promotion scenarios is studied.

Design/methodology/approach

Three differential game models, namely no coupon is offered, coupons offered by the manufacturer and coupons offered by the retailer, are constructed.

Findings

The results show that the manufacturer and retailer intend to conduct coupon promotions under a large coupon redemption rate. Coupon promotion derives a higher price and profit for the issuers, and the manufacturer can free-ride on the retailer's coupon promotion. The retailer's profit in the retailer-promotion scenario may be lower than that in the manufacturer-promotion scenario in some special conditions. Besides, price, coupon face value, brand image and profit increase over time. After multiple cycles game, the operational strategy evolves to an optimal equilibrium status.

Originality/value

This paper provides guidance and advice for dual-channel supply enterprises to implement joint pricing and coupon promotion strategies under multiple sales seasons.

Details

Kybernetes, vol. 51 no. 11
Type: Research Article
ISSN: 0368-492X

Keywords

Article
Publication date: 1 July 1997

Sirilaksana Khoman

Governments in developed and developing countries alike typically subsidize social services such as health and education, partly in recognition of the broad social benefits that…

796

Abstract

Governments in developed and developing countries alike typically subsidize social services such as health and education, partly in recognition of the broad social benefits that are generated, and partly to serve broad equity goals. Governments often provide such services themselves, or at least play a major role in provision, and subsidy is often effected by setting prices at government facilities at levels that are considered affordable by the poor. The extent to which redistribution is achieved, however, depends on how well proper targeting is accomplished. Uses a number of public hospitals in Thailand to explore the pricing of hospital services and its effect on provider and user behaviour. A survey of hospital users helps to identify the beneficiaries of the current system. Calculates the degree of cost recovery for each hospital department public facilities and estimates user responses to price and income changes. Compares costs, fees and actual payments to provide an indication of the extent of subsidy and the degree of cost recovery from different groups of patients. Finds that although public hospitals appear to be the only place affordable by the lowest income groups, they also serve middle to high income users as well. Argues that targeting can be improved. Also finds that hospitals charge only about 52‐58 per cent of cost for out‐patients, and 62‐66 per cent of cost for inpatients. In addition, among those who finance their own health care expenses, actual payment varies from 20 to 90 per cent of charges. As for the extent of subsidy, an out‐patient in the North receives an 88 per cent subsidy as in‐patients receive an even higher subsidy of 94 per cent. There is also some evidence that the extent of subsidy is high for the higher income groups. While welfare programmes appreciably benefit the lowest income groups, this is not exclusively so, and many beneficiaries fall into the medium and even high income categories. Government officials, most of whom are classified in the middle to high income groups, turn out to be most heavily subsidized through the civil service reimbursement of medical expenses. On the whole the estimated demand elasticities show that the demand for in‐patient and outpatient care is in general not sensitive to changes in price, money income, or total household income. Recommends further investigation into the possibility of greater selective reliance on user fees, with built‐in safeguards and better targeting of public services to protect the disadvantaged groups. Specifically recommends a closer alignment of user fees with the costs for services utilized by higher income groups (such as private rooms), with provision for continued subsidization of low income groups. Targeting would thus be improved.

Details

International Journal of Social Economics, vol. 24 no. 7/8/9
Type: Research Article
ISSN: 0306-8293

Keywords

Article
Publication date: 10 April 2019

Xiang Cai and Wei-Ning Wu

This paper aims to examine the factors affecting the implementation of affordable housing policies in two Chinese municipal governments. Since 2010, the Chinese government has…

Abstract

Purpose

This paper aims to examine the factors affecting the implementation of affordable housing policies in two Chinese municipal governments. Since 2010, the Chinese government has enforced an ambitious plan to adopt affordable housing provisions accompanying a series of urbanization programs. Furthermore, the policy implementation at the local level has led to various outcomes but has been scarcely investigated. The views of policy implementation from local officials are crucial in the context of intergovernmental relations. Therefore, it is important to examine the views of local public officials on the development status and challenges in the context of Chinese intergovernmental relations.

Design/methodology/approach

This paper verifies which factors exert significant impacts on the willingness of local officials to adapt affordable housing policies by using the logistic regression model and marginal effect estimation. With original data from the fieldwork surveys of city administrators, the measures incorporated local characteristics as well as the intergovernmental support from the central government in two selected megacities, Guangzhou and Shenzhen.

Findings

There are significant differences in local investment between the selected cities. Intergovernmental support from the central government, city development strategies, implementation perceptions of local governments and land supply, all significantly impact the selection of an affordable housing program and its overall implementation.

Originality/value

To the best of the authors’ understanding, this study would be one of the first to empirically explore the view of municipal public officials on affordable housing policy in China. This paper provides an empirical analysis from municipal public officials on the local implementation of affordable housing policies in China. As the outcome of housing policies actually depends on the implementation willingness of public officials and the overall performance of local governments, this explorative study would benefit the future development of China’s affordable housing policy.

Details

International Journal of Housing Markets and Analysis, vol. 12 no. 5
Type: Research Article
ISSN: 1753-8270

Keywords

Book part
Publication date: 1 May 2023

Hsiang-Hsi Liu, Pi-Hsia Hung and Tzu-Hu Huang

This research examines stock traders' disposition effects and contrarian/momentum behavior in the Taiwan Stock Exchange (TWSE). Specifically, we first investigate disposition…

Abstract

This research examines stock traders' disposition effects and contrarian/momentum behavior in the Taiwan Stock Exchange (TWSE). Specifically, we first investigate disposition effects across all trader types and then examine the relationships between disposition effects, trader types, and order characteristics. Next, we explore contrarian and/or momentum behavior and analyze the relationships among the contrarian/momentum behavior, investor type, and order characteristics. Finally, the links among trader types, order characteristics, and investment performance are detected. This chapter yields the following findings. (1) Individual investors exhibit the strongest disposition effects compared to other investors. (2) Foreign investors, investment trusts, and individual investors tend to use large orders to sell loser stocks. (3) Investment trusts are inclined to be momentum traders, while individual investors tend to perform contrarian strategies. (4) Institutional aggressive and large orders perform better than individuals' orders. (5) The performance of foreign investors' selling decisions is better than that of retail investors.

Details

Advances in Pacific Basin Business, Economics and Finance
Type: Book
ISBN: 978-1-80382-401-7

Keywords

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