Does IPO subscription demand affect investor herd behavior in Taiwan?

Wang, Chao-Shi; Tang, Hui-Wen Vivian; Chen, Roger C. Y.

doi:10.1016/j.iref.2017.06.004

Cited by 9 publications

(10 citation statements)

References 30 publications

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“…Yong (2011) demonstrates the impact of the winner's curse hypothesis and the bandwagon effect on IPO initial returns in Malaysia, underscoring the influence of informed investor participation on stock performance. Wang et al (2017) explore herd behavior in Taiwan's IPO market, revealing investors' propensity to follow subscription demand information. Herd behavior amplifies the winner's curse effect, leading to short-term overreactions and negative long-term returns.…”

Section: Bandwagon Effectmentioning

confidence: 99%

Cross-influence of Risk, Return, and Governance on Decision-Making in Hydropower Investments

Karki

2024

Econ J Dev Issues

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The sustainable growth of an economy pivots on a robust financial system, particularly in the context of capital availability. This study analyzes the behavior of investors towards initial public offerings (IPOs), focusing on the hydropower development sector in Nepal. The research explores the multifaceted relationship between factors such as risk, return, and governance on investor behavior, considering elements like Idiosyncratic risk (IR), timing of issue (TIPO), Bandwagon effect (BE), expected return (ER), sectoral performance (SP), corporate governance (CG), pre-issue financial health (PFH), and marketability (MKT). Additionally, sociodemographic variables and their connection to investor behavior are examined. Employing a descriptive research design, the study involves a sample size of 392 individuals, selected through a convenient sampling method. The study's main finding documented that idiosyncratic risks, expected returns, and corporate governance stand out as crucial factors influencing investment decisions (P < 0.05). Notably, the regression analysis indicated the absence of a significant impact from market risks (P > 0.05), including the bandwagon effect and IPO timing, on investor behavior towards hydropower IPOs. This finding suggests that Nepalese investors prioritize returns and organizational governance over market risks, despite having significant concerns regarding idiosyncratic risk. The analysis also reveals significant associations between investor behavior and sociodemographic variables like age, education, occupation, and primary investment objectives (P < 0.05). This study offers valuable insights and implications for investors seeking to align investments with their goals. Hydropower developers should prioritize investor protection and transparency, while regulators must enhance disclosures, shareholder accountability, and project oversight.

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Section: Bandwagon Effectmentioning

confidence: 99%

Cross-influence of Risk, Return, and Governance on Decision-Making in Hydropower Investments

Karki

2024

Econ J Dev Issues

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“…investors with the goal of avoiding investment risk or potential losses due to information disadvantages, or to reduce the cost of information; this might create herd behavior among investors (Wang et al, 2017). Kumar and Lee (2006) emphasized that individual investors typically have inferior information, which would enhance the motivation to engage in herding behavior among individual investors, especially in an investment environment in which there is significant information asymmetry (Lin et al, 2010).…”

Section: Research Model and Hypothesismentioning

confidence: 99%

“…In the context of IPO investment decisions, investors are more exposed to this phenomenon, where the lack of information about new issuers encourages investors, especially individual investors, to follow a herding strategy (Yao et al, 2014). Furthermore, the unique features of the primary market in emerging countries make it ideal for herding behavior (Wang et al, 2017). Conversely, other financial researchers have observed that herd behavior is a vague concept that ignores the judgements, information, and experiences of investors regarding the merits of their financial decisions (Kahan and Klausner, 1996).…”

Section: Research Model and Hypothesismentioning

confidence: 99%

Issues That Matter When Behavioral Finance Factors Drive the Largest Initial Public Offering in the Saudi Financial Market

Shaddady¹,

Alsaggaf²

2020

IJEFI

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Behavioral financing is an emerging science and a relatively new area for academic research, leveraging investors' irrational behavior. To a certain degree, most investment decisions are affected by investors' biases and expectations, which do not follow rationality requirements. This study rigorously investigated a group of behavioral financial factors-optimism, pessimism, overconfidence, herd behavior, and loyalty-and firm characteristics, and then it examined whether and to what extent behavioral financial factors drive investors' behaviors about the largest initial public offerings (IPOs). This study employed structural equation modelling and used a representative survey of 353 investors during the IPO of Saudi Aramco. The study found that the factors that stimulated investors in the Saudi market, especially during the Aramco IPO behavior decision, included behavioral finance factors, such as optimism, overconfidence, loyalty, and herd behavior, while firm characteristics failed to shape investors' decisions during Aramco's IPO.

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“…Indeed, investor demand is a critical component in IPO success and it is frequently measured by IPO subscription demand. It is worth mentioning that the impact of IPO subscription demand on IPO return has been subject of intense research among academics and practitioners Low and Yong (2011), Alqahtani and Boulanouar (2017), Wang et al (2017) and Tsukioka et al (2018), Albada et al (2019), Ariyanto et al (2020), Yan and Wang (2021). Dierkes et al (2022) and Deng et al (2023).…”

Section: Introductionmentioning

confidence: 99%

“…Actually, behavioral finance related studies generally maintain that investors tend to imitate and follow each other in matters of trading decision Chang et al (2000); Kumar and Lee (2006) and Wang et al (2017), thereby, rendering the IPO investors' herd behavior remarkably influential on IPO returns.…”

Section: Introductionmentioning

confidence: 99%

Modeling the Subscription Ratio and IPO Returns Non-Linear Relationship: Evidence from the Tunisian Stock Market

Mellouli,

Ellouz

2023

IJEFI

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To capture the herd behavior of IPO investors, the relationship binding IPO underpricing and the subscription ratio is often assumed to represent a straight line in the relevant literature, due mainly to recurrent general linear modeling in the data analysis process. In Tunisia, however, and following the subscription result declaration, all IPOs are usually met with noticeable success owing to over subscription issues, resulting in persistent herd behavior. In this context, the present paper is deigned to highlight how Tunisian investors tend to mimic each other on setting out to make trading decisions. More particularly, we attempt to specify the non-linear relationship binding the subscription ratio and IPO returns within a quantile regression, highlighting the investors’ noticeable sensitivity to high subscription, thereby, easily inducing the spread of herd behavior and increasing IPO returns.

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Does IPO subscription demand affect investor herd behavior in Taiwan?

Cited by 9 publications

References 30 publications

Cross-influence of Risk, Return, and Governance on Decision-Making in Hydropower Investments

Cross-influence of Risk, Return, and Governance on Decision-Making in Hydropower Investments

Issues That Matter When Behavioral Finance Factors Drive the Largest Initial Public Offering in the Saudi Financial Market

Modeling the Subscription Ratio and IPO Returns Non-Linear Relationship: Evidence from the Tunisian Stock Market

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