How Asian and Global Economic crises Prevail in Chinese IPO and Stock Market Efficiency

Mahmood, Faiq; Xia, Xinping; Ali, Mohammed Farid; Usman, Muhammad; Shahid, Humera

doi:10.5539/ibr.v4n2p226

Cited by 12 publications

(10 citation statements)

References 46 publications

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“…Investor interest provides the image of market conditions upon IPOs subscription (Loughran and Ritter, 2002). Similarly, before IPO listing market condition affects the sentiment of investors that generates higher oversubscription (Ma and Faff, 2007;Mahmood et al, 2011). Firm's characteristics of issuers and regulatory environment in Pakistan are essential in affecting investors' demand.…”

Section: Literature Reviewmentioning

confidence: 99%

Impact of pricing mechanism on IPO oversubscription: evidence from Pakistan stock exchange

Mehmood

Mohd‐Rashid

Ahmad

2020

PAR

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Purpose The purpose of this paper is to examine the effects of pricing mechanism on initial public offerings (IPOs) oversubscription in Pakistan. Design/methodology/approach This study used cross-sectional data to analyse 85 listed IPOs on the Pakistan stock exchange during the period of 2000-2017 to assess hypotheses related to influential determinants of IPO oversubscription. Accordingly, ordinary least square, robust regression and quantile regression approaches were applied in this study to evaluate the factors that influenced oversubscription. Findings The outcome displayed pricing mechanism is negatively significant with an oversubscription of IPOs. This indicates firms using the fixed-price mechanism signalled higher information asymmetry and uncertainty in their value. Thus, investors are aware that they will be offset with underpricing, and it is expected the demand will be higher for the particular IPOs. Research limitations/implications This study is entirely focused on the available information of prospectus that should not be ignored by potential investors at the time of subscription of IPO. Therefore, the study contributes to extending the available literature in signalling theory whereby issuers should consider using the book-building pricing mechanism in enhancing the efficiency of the IPO offer price during the listing. Originality/value This paper provides evidence for the determinants of the IPO oversubscription.

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Section: Literature Reviewmentioning

confidence: 99%

Impact of pricing mechanism on IPO oversubscription: evidence from Pakistan stock exchange

Mehmood

Mohd‐Rashid

Ahmad

2020

PAR

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“…The opposite is true when the market is in bearish condition. Following Mahmood et al (2011), the present study measures contemporaneous market condition on the listing date using the following equation:…”

Section: Control Variablesmentioning

confidence: 99%

Relationship between prestige signals and over-subscription ratio

Albada

Yong

Low

2019

IJMF

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Purpose The purpose of this paper is to examine whether initial public offering (IPO) over-subscription is a function of firm’s prestige signals conveyed by third parties with reputational capital such as underwriter, auditor and independent non-executive board member. Design/methodology/approach The relationship between prestige signals and over-subscription ratio (OSR) of IPOs is analysed using a cross-sectional regression based on a sample of 393 IPOs issued between January 2000 and December 2015. Findings The results indicate that IPOs underwritten by reputable underwriters have lower OSR than those underwritten by non-reputable underwriters. While issuer engages reputable underwriter to certify firm quality to reduce information asymmetry, the action brings with it lower initial returns for its IPO. Investors interpret the signal conveyed by issuer’s choice of underwriter from under-pricing perspective and respond accordingly by reducing IPO demand. This implies that investors regard under-pricing as a more valuable signal than firm quality signal associated with underwriter reputation. The findings also indicate that over-subscription increases in IPOs that have above average initial returns and higher institutional participation. Issuing firms that go public in a period of high IPO volume are associated with low OSR. Originality/value This is the first paper to examine the relationship between the prestige signals and OSR of IPOs in the Malaysian context.

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“…According to Ritter (1984), in bullish market condition, initial returns tend to be high because of high market confidence as reflected by high levels of stock prices, market volume and stock market index value. Following Mahmood et al (2011), the present study measures contemporaneous market condition on the listing date using the following equation:…”

Section: Ijoem 152mentioning

confidence: 99%

Prestige signals and heterogeneity of opinion regarding IPO values: Malaysian evidence

Albada

Low

Yong

2019

IJOEM

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Purpose The purpose of this paper is to examine the effects of prestige signals measured by the reputations of the underwriter, auditor and board size on the heterogeneity of investor belief about the true value of IPO in the Malaysian IPO market. Design/methodology/approach This study employs a sample of 281 IPOs issued between January 2000 and December 2015. The relationship between prestige signals and investor heterogeneity, measured by first-day price range of IPOs, is analysed using cross-sectional regression and quantile regression technique. Findings Of the three prestige signals, the findings show that only underwriter reputation and board size have significant negative relationships with IPO first-day price range. This implies that IPOs underwritten by reputable underwriters and issuing firms with larger board members have lower heterogeneity of opinion among investors. The findings also show that underwriter and auditor reputations have negative relationship with IPO initial return, suggesting that these prestige signals help to reduce IPO under-pricing, which is a direct cost of raising capital for the issuing firm. Furthermore, the results indicate that offer price, initial return, over-subscription ratio and private placement are associated with higher first-day price range. However, the findings on offer size suggest that larger IPO offer size is associated with lower first-day price range. Overall, the findings suggest that firm’s prestige signals reduce opinion heterogeneity among investors and that lower investors’ heterogeneity leads to lower IPO under-pricing cost for issuing firms. Originality/value Despite the importance of underwriter, auditor and board member reputations in signalling firm’s quality and reducing the level of information asymmetry of the listing firm’s issues, research on the effects of prestige signals on investor heterogeneity remains unexplored. This study investigates the role of prestige signals in influencing investors’ heterogeneity in Malaysia. The authors conjecture that underwriter, auditor and board member with higher reputations are associated with lower levels of opinion heterogeneity among IPO investors.

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How Asian and Global Economic crises Prevail in Chinese IPO and Stock Market Efficiency

Cited by 12 publications

References 46 publications

Impact of pricing mechanism on IPO oversubscription: evidence from Pakistan stock exchange

Impact of pricing mechanism on IPO oversubscription: evidence from Pakistan stock exchange

Relationship between prestige signals and over-subscription ratio

Prestige signals and heterogeneity of opinion regarding IPO values: Malaysian evidence

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