Download or read book Empirical Evidence on IPO Underpricing written by Marius Hamer and published by GRIN Verlag. This book was released on 2008 with total page 73 pages. Available in PDF, EPUB and Kindle. Book excerpt: Diploma Thesis from the year 2007 in the subject Business economics - Investment and Finance, grade: 1,3, European Business School - International University Schlo Reichartshausen Oestrich-Winkel, 80 entries in the bibliography, language: English, abstract: This paper aims at establishing a link between the average level of initial return of IPO shares, existing underpricing explanations and the dot-com bubble. In years prior to the boom of the new economy, underpricing was explained by various theories, which have extensively been developed since decades. However, in the years 1998 to 2001 IPOs were overly underpriced, leading to assumptions about behavioural aspects and investor irrationality. Analysing a comprehensive dataset of 371 IPOs on the Frankfurter B rse between 1997 and 2007, this paper aims at providing evidence that the observed lower levels of initial returns in recent years can indeed be aligned with existing theories on the basis of rational behaviour of market participants. Firstly, the IPO process and its major participants will be presented followed by a review of relevant studies on the IPO phenomenon. In the next step, established underpricing theories are recapitulated. A descriptive analysis of the data sample points out the particularities concerning the company and transaction characteristics of the sample firms. In a last step, a regression analysis relates various proxies for information asymmetry to established underpricing theories. It gives reason to believe that the irrationality at the turn of the century has vanished and that underpricing can again be explained by established theories.

Download or read book Empirical Evidence on Book building Method and IPO Underpricing written by Andrew Yui Cheong Wong and published by . This book was released on 1999 with total page 108 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Institutional Allocation in Initial Public Offerings written by Reena Aggarwal and published by . This book was released on 2002 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze institutional allocation in initial public offerings (IPOs) using a new dataset of US offerings between 1997 and 1998. We document a positive relationship between institutional allocation and day one IPO returns. This is partly explained by the practice of giving institutions more shares in IPOs with strong pre-market demand, consistent with book-building theories. However, institutional allocation also contains private information about first-day IPO returns not reflected in pre-market demand and other public information. Our evidence supports book-building theories of IPO underpricing, but suggests that institutional allocation in underpriced issues is in excess of that explained by book-building alone

Download or read book Value creation by private equity backed IPOs Underpricing and long term performance in Germany written by Matthias Hetzenecker and published by GRIN Verlag. This book was released on 2020-11-19 with total page 76 pages. Available in PDF, EPUB and Kindle. Book excerpt: Bachelor Thesis from the year 2019 in the subject Business economics - Review of Business Studies, grade: 1,0, University of applied Sciences Regensburg, language: English, abstract: This paper examines value creation by private equity-backed IPOs. It gives detailed insights on a mostly US-based research topic analyzing 134 German IPOs from 2002 to 2018, of which 49 were identified as PE-backed, and contributes empirical evidence on the discussion of private equity value creation. The empirical results provide detailed information on whether private equity financing can be a suitable financing source for companies by comparing and analyzing the performance differences between IPOs of companies with and without private equity sponsors. Furthermore, the paper provides empirical evidence on the IPO phenomena of underpricing and negative long-term performance for Germany, differentiating itself from former studies in terms of a broader time horizon and an extensive return calculation methodology. Since the locust swarms debate initiated by SPD politician Franz Müntefering, private equity investors have had to struggle with an extremely bad reputation in Germany. Unpopular measures such as company divestures or mass redundancies to achieve set turnover and return targets reinforce the negative image of financial investors. Accordingly, investor and business magnate Warren Buffet criticized that businesses under private equity control become a piece of merchandise. Nonetheless, the private equity industry continues to boom, reaching new records in terms of global business volume and transactions. Under these circumstances and new evolving discussions, it is essential to take a close look at the business model of private equity firms and to analyze potential short- and long-term value creation in their portfolio companies.

Download or read book IPO Underpricing in Germany Empirical Analysis of Influencing Variables written by Justyna Dietrich and published by diplom.de. This book was released on 2011-10-27 with total page 76 pages. Available in PDF, EPUB and Kindle. Book excerpt: Inhaltsangabe:Introduction: Detected on the US market centuries ago, underpricing is the phenomenon of abnormal first-day returns from initial public offerings (IPOs). Without doubt, any US investor would agree, that one day-returns of 11.4% on average are exceptional and a worthwhile investment. Since then many studies have proven that it is a persistent phenomenon and also occurs on markets all over the world. The most puzzling question for scientists is why companies are leaving this money on the table and don t set an offering price that reflects the market demand at the offering date. Within that, researchers have also been trying to determine the factors that influence the severity of underpricing. Many different explanations with regard to the existence of underpricing have been derived thus far, with all claiming to be valid even if not exclusively. But despite this effort, research so far has not been able to create common sense. Some even argue that underpricing may not exist at all since most IPOs underperform severely in the long-run which leads some people to the conclusion that IPOs are in fact overpriced. The main focus of this paper is whether and how the findings of past research, primarily conducted for the US market, apply to the German IPO market. As a result, both investors and issuers shall receive practical implications for their decision-making within the IPO process. So far, profound underpricing research for the German market has been rather scarce. Most of the available literature concentrates either on dates before 1997 when most offering prices have been determined by using the fixed price mechanism whereas the most recent studies focus on the German stock exchange segment Neuer Markt exclusively. In contrast, this paper aims to give a more recent analysis of underpricing on the German market without distinguishing between different market segments. Additionally, a broad over-view and understanding of IPO underpricing, taking the long-run performance of IPOs into account, will be included. As a result, this paper is structured as follows: The second section consists of a description of some of the important theoretical aspects that have influence on the price setting of an IPO. It will concentrate on business valuation as it is the basis for setting the price of an IPO. Furthermore, the most common price setting mechanisms shall be explained. Additionally, the special role of the lead underwriter in the IPO [...]

Download or read book Institutional Allocation in Initial Public Offerings written by Reena Aggarwal and published by . This book was released on 2012 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze institutional allocation in initial public offerings (IPOs) using a new dataset of US offerings between 1997 and 1998. We document a positive relationship between institutional allocation and day one IPO returns. This is partly explained by the practice of giving institutions more shares in IPOs with strong pre-market demand, consistent with book-building theories. However, institutional allocation also contains private information about first-day IPO returns not reflected in pre-market demand and other public information. Our evidence supports book-building theories of IPO underpricing, but suggests that institutional allocation in underpriced issues is in excess of that explained by book-building alone.

Download or read book The Phenomenon of IPO Underpricing in the European and U S Stock Markets written by Oliver Reiche and published by diplom.de. This book was released on 2014-06-01 with total page 102 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Initial Public Offering (IPO) marks one of the most important events of a company. Basically, the aim is to generate maximum proceeds by selling the company’s shares to investors. However, the shares that are sold seem to be underpriced as the price significantly soars on the first trading day. Since the very first detection of this phenomenon in the United States in 1969, several subsequent studies have documented the existence of worldwide IPO underpricing. This study focuses on IPO Underpricing in the European and United States Stock Markets by outlining and discussing the following essential issues: What is underpricing in the context of the IPO? Which motivations are there and how do they impact? Is there IPO underpricing in the markets of Europe and the United States of America?

Download or read book Variables Influencing the Severity of IPO Underpricing An Empirical Analysis of the German Market written by Justyna Dietrich and published by Diplomica Verlag. This book was released on 2012-03 with total page 81 pages. Available in PDF, EPUB and Kindle. Book excerpt: Underpricing refers to the phenomenon of abnormal first-day returns from initial public offerings (IPOs). Without doubt, any US investor would agree that one day-returns of 11.4% on average are exceptional and a worthwhile investment. Since then many studies have proven that it is a persistent phenomenon and also occurs on markets all over the world. The most puzzling question for scientists is why companies are leaving this money on the table and do not set an offering price that reflects the market demand at the offering date. The main focus of this paper is whether and how the findings of past research, primarily conducted for the US market, apply to the German IPO market. As a result, both investors and issuers shall receive practical implications for their decision-making within the IPO process. This study comprises a brief description of some important theoretical aspects that shape the price setting of an IPO. It focuses on business valuation as it is the basis for setting the price of an IPO. Furthermore, the most common price setting mechanisms are explained. Past research results and theories with regard to IPO underpricing will be outlined and put into relation to the upcoming analysis. This also includes the long-run performance of IPOs and deals especially with the question of whether IPOs are systematically overvalued by investors and, if so, why. The empirical analysis consists of a deduction of influencing variables and an applying theoretical model. Finally, OLS results will be presented and interpreted, which also includes practical implications for both, issuers and investors.

Download or read book The Listing Market Choice and the IPO Underpricing written by Takeshi Yamamoto and published by . This book was released on 2009 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this study, I have reviewed companies that conducted IPOs between 1990 and 2004, measuring the underpricing, which represents the ratio of the initial offering price to the price immediately after the listing, and considered the explanatory factors from a statistical point of view. There are quite a few empirical studies about IPO underpricing including those which studied Japanese companies, but in conducting this study, I broke the Japanese companies that conducted IPOs in Japan into those which were more interested in the maximization of the offering price and those which are more interested in the success of future offers at market price, hypothesizing nevertheless that both types of companies have made their choice for the purpose of minimizing the opportunity loss for the existing shareholders that arises from the underpricing, and the amount of loss that arises from dilution. In Japan, apart from the IPOs by entrepreneurs, there are many cases of public offerings by subsidiaries or affiliated companies of industrial companies that are listed companies themselves.I hypothesized that many of the former companies seek lower costs and higher post-offering liquidity, while many of the latter companies seek markets that represent smaller underpricing even at a higher cost. In Japan, two groups of markets where IPOs are possible have long coexisted; the second section and regional markets, and JASDAQ and markets for emerging companies, competing with each other without one overpowering the other. As a factor to explain this fact, I will point to the unique characteristics that each group offers that suit the different purposes of the companies conducting an IPO.In this study, taking into consideration the endogenous relationship between the IPO underpricing and the number of offered/sold shares, I have estimated the model that explains the choice of listing market by the IPO company in the first step, and, taking the result into consideration, I have introduced a simultaneous equation model to perform OLS estimation to explain underpricing in the second step.

Download or read book Product Market Advertising and Initial Public Offerings written by Thomas J. Chemmanur and published by . This book was released on 2010 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: Practitioners have noted that firms tend to increase their product market advertising prior to an IPO or a seasoned equity issue. Further, recent empirical evidence indicates that firms with a greater level of product market advertising have lower bid-ask spreads and a larger number of both individual and institutional investors in their equity. We develop a theoretical model of the interaction between a firm's product market advertising and its corporate financing decisions in the above context. We consider a firm which faces asymmetric information in both the product and the financial market (about the quality of its products and the intrinsic value of its projects) and which needs to raise external financing to fund its growth opportunity (new project). Any product market advertising undertaken by the firm is visible in the financial market as well. We show that, in equilibrium, the firm uses a combination of product market advertising, IPO underpricing, and underfinancing (raising a smaller amount of external capital than the full information optimum) to convey its true product quality and the intrinsic value of its projects to consumers and investors. Our model has several implications for IPO underpricing and product market advertising. Two of these predictions are as follows. First, firms will choose a higher level of product market advertising when they are planning to issue new equity or other information-sensitive securities, compared to situations where they have no immediate plans to sell such securities. Second, product market advertising and IPO underpricing are substitutes for a firm going public. The empirical evidence supports these two predictions: First, firms indeed increase their product market advertising in their IPO year relative to a benchmark year two years before their IPO. Further, we find that, in the five-year span around the IPO year (i.e., the IPO year, and the two years before and after the IPO year), the peak advertising level is reached in the IPO year. Second, the extent of underpricing is smaller as the level of product market advertising is greater.

Download or read book An Empirical Research on the Relationship Between Venture Capital and IPO Underpricing in the GEM written by MInchun He and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Management Ownership and IPO Underpricing written by Sandy Chee Han Tee and published by . This book was released on 2004 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book IPO Underpricing in China written by Eddy Chang and published by . This book was released on 2007 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper divides Chinese A-Share IPO initial returns into the initial return of the primary market and of the secondary market. Our empirical evidence shows that the initial abnormal return on the secondary market is significantly positive. This study also finds that 1) the initial return of the primary market is negatively related to the subscription or lottery ratio; 2) the initial return of the secondary market is positively related to the market return, and negatively related to IPO offering prices; 3) the initial turnover is negatively related to the offering size; 4) the initial turnover has no impact on the initial return of the secondary market but the latter has a significantly positive influence on the initial turnover.

Download or read book Underpricing Tie ins and the IPO Bubble written by Robert M. Hull and published by . This book was released on 2005 with total page 16 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Explanations of Underpricing of Initial Public Offerings in Denmark written by Kaspar Kofod and published by . This book was released on 2001 with total page 137 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book An Empirical Investigation of Underpricing in Chinese Ipos written by Dongwei Su and published by . This book was released on 1997 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we empirically identify some of the causes of cross-sectional differences in underpricing of Chinese initial public offerings (IPOs) using data compiled for 308 firm-commitment A-share IPOs (available only to Chinese investors) and 57 B-share IPOs (available only to foreign investors). We first formulate and estimate a benchmark empirical model that relates IPO initial returns to variables widely used in studies of IPO underpricing. Then we test three hypotheses that may help explain the high A- share IPO underpricing in China. We find that IPO underpricing is the largest at the earliest stage of development of stock markets in China. The extraordinarily large IPO underpricing is at least partially due to a relatively small aggregate supply of shares. We also find that A-share IPO underpricing is better explained by a signaling model that relates IPO underpricing to subsequent seasoned equity offerings (SEOs) than by one linking government or employee ownership to equilibrium IPO underpricing. Issuers with larger IPO underpricing are more likely to raise larger amounts of capital through SEOs more quickly. The results support the notion that the primary purpose for Chinese firms going public is to raise capital, not to transfer ownership from state to private citizens. Moreover, we do not find any evidence that lottery mechanisms have contributed to the high IPO underpricing in China. Finally, we find some evidence that the difference in IPO underpricing among A and B shares can be explained by the differences in domestic and foreign investors' investment opportunities and investment sentiments.

Download or read book An Empirical Examination of IPO Underpricing Between High Technology and Non High Technology Firms in Taiwan written by Simon Gao and published by . This book was released on 2017 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study investigates the determinants of initial public offering (IPO) underpricing by focusing on variables relating to information asymmetry, investor sentiment, and corporate governance and examines whether the determinants of IPO underpricing in high-technology and non-high-technology IPOs differ. With the data from Taiwan from 2009-2011, this study finds that overallotment is negatively related to underpricing, whereas market momentum, first day trading volume, and managers' ownership retention rates are positively related to underpricing, particularly for high-technology IPOs. Our results support the signaling hypothesis in high-technology IPOs.