Auctions versus book-built IPOs in Japan: A comparison of aftermarket volatility

Pettway, Richard H.; Thosar, Satish; Walker, Scott

doi:10.1016/j.pacfin.2007.04.010

Cited by 18 publications

(19 citation statements)

References 14 publications

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“…Figure 3, which we discuss more fully below, shows graphically that the sign of this relationship arises partly from resistance to setting the maximum of the range below the original price. The coefficients on the four 20-market-day intervals of market run-up ending 20 market days before the 20 Using a similar measure to ours, Pettway, Thosar, and Walker (2008) find that aftermarket volatility of Japanese IPOs is higher for book-built IPOs than for the hybrid-auction IPOs that occurred in an earlier regime. While they interpret their evidence to be inconsistent with Sherman (2005), they offer no affirmative alternative.…”

Section: A1 Initial Price Adjustmentsupporting

confidence: 56%

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Public Information, IPO Price Formation, and Long‐Run Returns: Japanese Evidence

Kutsuna¹,

Smith²,

Smith³

2009

The Journal of Finance

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The price formation process of JASDAQ IPOs is more transparent than in the United States. The transparency facilitates analysis of important issues in the IPO literature-why offer prices only partially adjust to public information and adjust more fully to negative information, and why adjustments are related to initial returns. The evidence indicates that early price information conveys the underwriter's commitment to compensate investors for acquiring and/or disclosing information. Offer prices reflect pre-IPO market values of public companies and implicit agreements between underwriters and issuers that originate well before the offering. Underadjustment of offer prices is substantially reversed in the aftermarket. Copyright (c) 2009 The American Finance Association.

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Section: A1 Initial Price Adjustmentsupporting

confidence: 56%

“…20 20 Using a similar measure to ours, Pettway, Thosar, and Walker (2008) find that aftermarket volatility of Japanese IPOs is higher for book‐built IPOs than for the hybrid‐auction IPOs that occurred in an earlier regime. While they interpret their evidence to be inconsistent with Sherman (2005), they offer no affirmative alternative.…”

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confidence: 63%

Public Information, IPO Price Formation, and Long‐Run Returns: Japanese Evidence

Kutsuna¹,

Smith²,

Smith³

2009

The Journal of Finance

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“…The results are similar if we calculate aftermarket variability over different horizons.17 For a comparative analysis of aftermarket variability in bookbuilt vs. auctioned IPOs, seePettway et al (2008).…”

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confidence: 64%

Auctioned IPOs: The US evidence

Degeorge

Derrien

Womack

2010

Journal of Financial Economics

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Between 1999 and 2007, WR Hambrecht has completed 19 IPOs in the U.S. using an auction mechanism. We analyze investor behavior and mechanism performance in these auctioned IPOs using detailed bidding data. The existence of some bids posted at high prices suggests that some investors (mostly retail) try to free-ride on the mechanism. But institutional demand in these auctions is very elastic, suggesting that institutional investors reveal information in the bidding process. Investor participation is largely predictable based on deal size, and demand is dominated by institutions. Flipping is equally prevalent in auctions as in bookbuilt deals-but unlike in bookbuilding, investors in auctions tend to flip their shares more in cold deals. Finally, we find that institutional investors, who provide more information, are rewarded by obtaining a larger share of the deals that have higher initial returns. Our results therefore suggest that auctioned IPOs could be an effective alternative to traditional bookbuilding.

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“…1 The key reason why the value of equity is incompletely revealed during the process of VC exit is the asymmetry information between participants in the market. As a value revealing mechanism under the asymmetric information environment, through price competition and mechanism design, auction can make sure that each bidder reports his or her true type, the bidder who has the highest valuation gained the subject matter.…”

Section: Introductionmentioning

confidence: 99%

“…Scholars at home and abroad have carried out research in this area. Richard, Pettway Satish and Scott [1] studied on the Japan's IPO market and found that, compared to the transfer agreement means, IPO pricing by auction can reflect the true value of enterprise more accurately. Domestic scholars Zheng Junjun and Tang Peng [2] studied the issue of VC's withdrawal in exit market, they employed the multi-attribute first price sealed auction theory to reveal the true value of venture enterprise in the context of asymmetric information, and 1 This work is supported by National Natural Science Foundation of China under Grant (71071120).…”

Section: Introductionmentioning

confidence: 99%

Mechanism Design of Multi-Attribute Auction Based on Venture Capital

Zheng

Jiang

Han

2011

2011 International Conference on Management and Service Science

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The venture enterprise' value is not fully revealed as a result of asymmetric information in venture capital exiting market. To solve this problem, this paper studies the venture capital equity trading mechanism design under the assumption of the IPV model based on multi-attribute auction theory. To make our research closer to reality, this paper relaxes previous assumption and studies the venture capital equity trading in the case of affiliated values and establishes the corresponding multi-attribute auction model. The study enriches the venture capital exit research content, and provides a theoretical guidance to venture capital exit with the auction approach.Keywords-venture capital exit; multi-attribute auction; mechanism design; affiliated values I. INTRODUCTIONThe venture capital (VC) exit is a key link from the cycle of VC. 1 The key reason why the value of equity is incompletely revealed during the process of VC exit is the asymmetry information between participants in the market. As a value revealing mechanism under the asymmetric information environment, through price competition and mechanism design, auction can make sure that each bidder reports his or her true type, the bidder who has the highest valuation gained the subject matter. So, can we reveal the true value of venture enterprise's equity by using auction theory in asymmetric information market? Scholars at home and abroad have carried out research in this area. Richard, Pettway Satish and Scott [1] studied on the Japan's IPO market and found that, compared to the transfer agreement means, IPO pricing by auction can reflect the true value of enterprise more accurately. Domestic scholars Zheng Junjun and Tang Peng [2] studied the issue of VC's withdrawal in exit market, they employed the multi-attribute first price sealed auction theory to reveal the true value of venture enterprise in the context of asymmetric information, and

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Auctions versus book-built IPOs in Japan: A comparison of aftermarket volatility

Cited by 18 publications

References 14 publications

Public Information, IPO Price Formation, and Long‐Run Returns: Japanese Evidence

Public Information, IPO Price Formation, and Long‐Run Returns: Japanese Evidence

Auctioned IPOs: The US evidence

Mechanism Design of Multi-Attribute Auction Based on Venture Capital

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