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Both issuing firms and underwriters shall benefit from the associations in underwriting contracts for seasoned equity offerings (SEOs). Issuing firms that are offered underwriting contracts with clustered gross spreads do not have strong incentives to switch away from the firms' prior SEO underwriters, and thus these existing underwriters are able to maintain or gain greater market share. This study investigates how the clustering of percentage gross spreads affects the likelihood of underwriter switching.

Using the investment bank-underwritten SEOs in Hong Kong, the authors find that the percentage gross spreads of 40% of these SEOs are clustered at 2.5%. The seemingly unrelated bivariate probit model, Weibull survival mixed model and trivariate probit model are applied to analyse this phenomenon.

The authors' study provides first direct evidence that the clustering of percentage gross spreads lowers the likelihood of underwriter switching. Investment banks as underwriters can explicitly price underwriting contracts at a clustered level, more likely in periods of greater market volatility, and intentionally retain the banks' client firms using pricing arrangements. The authors' finding and approach offer more direct and distinct support that the issuer–underwriter association can be relationship-based.

Whilst the clustering of fees is interpreted as a type of anticompetitive price sitting, the authors contribute to literature by providing new empirical evidence on why percentage gross spreads as a price dimension are clustered. On top of contract efficiency and collusion, this study's new evidence provides a third view for the clustering of gross spreads.

The purpose of this paper is to investigate the empirical relevance of attribute framing in the financial marketplace.

Incorporating a sample of German initial public offerings (IPOs) from 2010 to 2019, the author uses quantitative methods, including regression models and tests for the equality of means, to analyze whether unsophisticated investors are susceptible to attribute framing and whether this susceptibility reflects irrational behavior.

Unsophisticated investors, who are typically retail investors, are susceptible to attribute framing. They are likely to subscribe to IPOs whose attribute “market valuation” is framed in a positive way, that is, IPOs with low offer prices. As low-priced IPOs are overvalued and underperform in the secondary market relative to high-priced IPOs, the susceptibility to attribute framing reflects irrational behavior. The findings are robust to controlling for sentiment.

Since this paper includes a relatively small sample from a single stock market, future research might employ alternative approaches.

When issuers and underwriters are able to exploit retail investors through attribute framing, the participation of these investors in the financial marketplace may finally decrease. Therefore, the financial literacy of retail investors needs to be improved.

This paper is the first to provide empirical evidence of attribute framing in a financial markets context. While most previous research on IPO offer prices focuses on US stocks, this paper is the first to incorporate German stocks.

This paper aims to study the underpricing phenomenon of initial public offerings (IPOs) of 355 Indian companies issued from 2007 to 2019. The research question this paper empirically examines is whether Indian corporate executives deliberately underprice IPOs from its fair value to attract investors, thereby causing an abnormal spike in the prices on the listing day. The findings of this study challenge a commonly held notion of leaving money on the table by IPO issuing companies. Of the overall average listing day returns of 17%, the deliberate premarket underpricing component is found to be mere 5.3%, while the remaining price fluctuation is, inter alia, a result of market momentum along with the unmet demands of impatient investors.

Following Koop and Li (2001), this study uses Stochastic frontier model (SFM) to study a routine anomaly of disparity between the primary market price (i.e. IPO issue price) and the secondary market price (listing price). The jump in the issue price observed on a listing day is decomposed into deliberate premarket underpricing component that reflects the extent of managerial manipulation and the after-market misvaluation component attributable to information asymmetry and prevailing market volatility.

This paper uses SFM to bifurcate initial returns into deliberate underpricing by managers and after-market mispricing by noise traders. This study finds that a significant part of the initial return is explained through after-market mispricing. This study finds that average initial returns are 17%, deliberate premarket underpricing is 5.3% and after-market mispricing averages 11.9%.

This study can isolate underpricing done at the premarket by estimating a systematic one-sided error term that measures the maximum predicted issue price deviation from the offered price. Consequentially, the disaggregation of initial returns may be especially informative for retail investors in planning their exit strategy from an IPO by separating the strength of the firm's fundamentals and its causal relationship with the initial returns. Substantial proportion of after-market mispricing implies that future research should focus on factors causing after-market mispricing. As underlying causes are identified, tailor-made policy responses can be formulated to benefit investors.

This paper has empirically validated that initial return is a mix of both components, i.e. deliberate underpricing and aftermarket mispricing. This disaggregation of initial returns can prove helpful for investors in planning their exit strategy. This study can help investors to become more aware of the importance of the fundamentals of the firm and its causal relation with the initial returns. This information in turn can help reduce the information asymmetry amongst investors and help them lessen the costs of adverse selection.

A large number of research studies on IPO pricing find overwhelming evidence of underpricing in public issues. This research attempts to decompose the extent of underpricing into deliberate underpricing and after-market mispricing, thereby supplementing the existing literature on the IPO pricing puzzle. To the best of the authors’ knowledge, this study is the first contribution to the literature on initial return decomposition for the Indian capital markets.

Driven by the anticipated global stagflation, this straightforward yet novel study examines the cost of inflation as a macroeconomic factor by investigating its influence on stock market growth. Thus, this paper aims to examine the impact of inflation on the probability of initial public offering (IPO) withdrawal decision.

The paper employs a large dataset that covers the period January 1995–December 2019 and comprises 33,536 successful or withdrawn IPOs from 22 nations with various legal and cultural systems. This study applies a probit model utilizing version 15 of Stata statistical software.

This study finds that inflation is substantially and positively correlated with the likelihood of IPO withdrawal. Results of this study show that the IPO withdrawal decision increases up to 90% when the inflation rate climbs by 10%. Multiple robustness tests provide consistent findings.

This study's implications are important for researchers, investment banks, underwriters, issuers, regulators and stock exchanges. When processing IPO proposals, investment banks, underwriters and issuers must consider inflation projections to avoid negative effects, as demonstrated by the findings. In addition, regulators and stock exchanges must be aware of the detrimental impact of inflation on competitiveness in attracting new listings.

To the best of the authors’ knowledge, this study is the first to present convincing evidence of a major relationship between IPO withdrawal decision and inflation.

The regulatory design of Indian stock market provides us with the opportunity to disaggregate initial returns into two categories, i.e. voluntary premarket underpricing and post market mispricing. This study explores the impact of investor attention on the disaggregated short-run returns and long-run performance of initial public offerings (IPOs).

The study employs regression techniques on the sample of IPOs listed from 2005 to 2019. It measures investor attention with the help of the Google Search Volume Index (GSVI) extracted from Google Trends. Along with GSVI, the subscription rate is used as a proxy to measure investor attention.

The empirical results suggest a positive and significant relationship between initial returns and investor attention, thus validating the attention theory for Indian IPOs. Furthermore, when the returns are analysed for a more extended period using buy-and-hold abnormal returns (BHARs), it was found that price reversal holds in the long run.

This study highlights the importance of information diffusion in the market. It emphasizes the behavioural tendency of the investors in the pre-market, which reduces the market efficiency. Hence, along with fundamentals, investor attention also plays an essential role in deciding the returns for an IPO.

According to the best of the authors’ knowledge, this is one of the first studies that has attempted to explore the influence of investor attention and its interplay with underpricing and long-run performance for IPOs of Indian markets.

This study aims to outline the research field of initial public offerings (IPOs) pricing and performance by combining bibliometric analysis with a systematic literature review process.

The study uses over three decades of IPO publication records (1989–2020) from Scopus and Web of Science databases. An analysis of keyword co-occurrence and bibliometric coupling was used to gain insights into the evolution of IPO literature.

The study categorized the IPO research field into four primary clusters: IPO pricing and short-run behaviour, IPO performance and influence of intermediaries, venture capital financing and top management and political affiliations and litigation risks. The results offer a framework for delineating research advancements at different stages of IPOs and illustrate the growing interest of researchers in IPOs in recent years. The study identified future research potential in the areas of corporate governance, earning management and investor sentiments related to IPO performance. Similarly, the study highlighted the opportunity to test multiple theoretical frameworks on alternative investment platforms (SME IPO platforms) operating under distinct regulatory environments.

To the best of the authors’ knowledge, this paper represents the first instance of using both bibliometric and systematic review to quantitatively and qualitatively review the articles published in the area of IPO pricing and performance from 1989 to 2020.

Small and medium enterprises (SMEs) play a crucial role in national economies worldwide, generating employment and contributing to innovation. This study tries to investigate the performance of the newly started IPO platform for the SMEs in India through a two-staged framework developed to measure pre-market and post-market underpricing separately and the impact of economic policy uncertainty (EPU) on the IPO returns using the EPU index which is based on newspaper coverage frequency. Further, the long-run performance of SME IPOs and the factors affecting the same have also been analyzed. The two-staged framework is helpful in capturing the impact of different factors separately on the two distinctive markets and providing effective investment strategies to the investors.

A sample of 384 SME IPOs issued during 2012–2018 has been analyzed using robust regression analysis.

The study highlights the fact that there are differences in the factors affecting pre-market and post-market underpricing and reports that investors subscription rate, issue expenses, lead manager reputation and EPU are positively associated, whereas the age of the firm is negatively associated with the pre-market underpricing, and lead manager reputation positively impacts the post-market underpricing whereas issue premium and pre-market underpricing are negatively associated. Pre-market underpricing subsumes all the impact of EPU (publicly available information) in it, hence providing credence to the semi-strong market hypothesis of the Efficient Market Hypothesis (EMH). The long-run performance of SME IPOs increases with time, and lead manager reputation, pre-market and post-market underpricing are positively related to the one-year return whereas issue size, turnover and issue expense are negatively related.

This paper is believed to be the first attempt to analyze the performance of SME IPOs by disaggregating IPO underpricing. The findings of this study will have a great insight for the investors and policymakers.

This study aims to examine the reaction of anchor investors (AIs) to pre-IPO earnings management (EM). The authors use the unique detailed bid data from the Indian anchor experiment. The authors also study the reputed AIs’ EM detection ability and pricing behavior in response to pre-IPO EM.

The authors use unique AI bid data for 169 Indian IPO firms. Utilizing the logistic regression and Tobit regression models with industry and year-fixed effects, the authors examine the relationship between various measures of AI participation and proxies of short-term and long-term discretionary accruals.

The authors document that pre-IPO EM is positively associated with the likelihood of anchor backing but negatively related to the likelihood of reputed anchor backing. The findings indicate that AIs are misled by pre-IPO EM, but reputed AIs are not. The authors also observe that reputed AIs, compared to the non-reputed, pay less than the upper band with increasing EM. The findings are robust to using various AI measures and EM proxies.

The findings have significant implications for regulators in the implementation of AI concept in non-anchor markets and better implementation of policies in existing anchor settings. Findings can also be relevant for non-institutional investors in the IPO domain.

This is one of the few studies on institutional investors' IPO bidding behavior in response to pre-IPO EM. However, this is the first study to analyze AIs' IPO bidding behavior in response to pre-IPO EM.

The last two years are characterized by record numbers of initial public offerings (IPOs), foreign investor abstinence and rising retail investor appetite in the Turkish stock market. This study aims to investigate whether retail investor dominance coupled with foreign investor aversion has significant impact on initial and short-term returns.

The research covers the population of 188 companies going public at Borsa Istanbul from 2010 to the end of 2021. Three hypotheses are developed and tested by means of ordinary least squares and Tobit regressions to examine the association between investor allocations and returns. A new measure for retail investor trade size, average retail investment per capita (ARI) is utilized to explain the linkage between retail investor appetite and short-term returns. Two-stage least squares and Heckman selection regressions are employed for robustness tests to address potential endogeneity.

Pandemic IPOs provide significantly larger short-term returns than pre-pandemic IPOs measured up to one month. Underpricing during the pandemic is not significantly greater due to 10% daily price limit, which leads to a gradual release of retail investor appetite and increase in stock prices in the short term. Retail investors control 66% of the market during the pandemic compared to 35% before, while foreign institutional investor market share declines from 53% to 6%. Average retail investor number in an offering increases by 55.4-fold during the pandemic, resulting in substantially smaller allocations to the average individual investor. Greater returns during the pandemic are associated with smaller retail investment per capita, while domestic institutional investment is associated with lower returns as typically expected from institutional investors, although its significance disappears after controlling for potential endogeneity.

This study investigates returns up to one month. To better understand whether short-termism of retail investors and recent foreign investor aversion have detrimental effect on companies, and on the market as a whole, longer-term studies are needed. This is not possible at the current stage since not enough time has passed.

This research is relevant to emerging market investors and companies due to the ongoing foreign investor aversion and fast-changing market conditions. The research cautions market participants against the short-termism of retail investors and urges policymakers to regain investors with longer investment horizons.

Many newcomer retail investors are in the stock market due to lack of more profitable alternatives in Turkey. Although their participation is accompanied by larger short-term returns for the time being, the current momentum is unlikely to last long as the pandemic ends, and interest rates around the world begin to be raised. The study urges small investors to invest in a more informed manner and aim for longer time horizons, as it may not be possible to make a quick profit in the stock markets in the near future.

This is the first study to investigate changing investor profile in emerging markets and its impact on returns following pandemic declaration. The question is important because the investor composition affects the investment horizon in the market.

This article investigates the determinants of cross-section variation of initial public offerings' (IPOs) first-day returns in a sample of 710 issues across seven emerging markets between 2013 and 2017.

Ordinary least squares regression (OLS) and the semi-parametric quantile regression (QR) technique are employed. QR enables to analyse beyond the explanatory variables' relative mean effect at various points in the endogenous variable distribution. Furthermore, parameter estimates under QR are robust to the existence of outliers and long tails in the data distribution.

Underpricing varies across countries with an average of 78%. According to the OLS results, independent variables explain 26% of the variation of IPOs' first-day returns. Findings show that employing QR is important, given the non-normality of the data and because each quantile is associated with a different effect of explanatory variables.

In addition to firm-specific, market-specific and issue-specific factors, the paper extends IPOs' underpricing literature through studying the impact of country-specific characteristics, largely neglected by literature, on IPO underpricing.