Insiders’ Pre-IPO Ownership, Underpricing, and Share-Selling Behavior: Evidence from Korean IPOs

Kang, Sang Koo; Kang, Hyung Cheol; Kim, Joonghyuk; Kim, Noolee

doi:10.1080/1540496x.2015.1039902

Cited by 6 publications

(5 citation statements)

References 17 publications

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“…Further, the largest shareholder holdings (OWNER) are expected to be positively associated with underpricing, as indicated by Booth and Chua (1996) and Brennan and Franks (1997). These firm-specific variables indeed affect IPOs in Korea, as shown in studies on Korea such as Cho and Lee (2013) and Kang, Kang, Kim, and Kim (2015).…”

Section: Industry Concentrationmentioning

confidence: 83%

The impact of mandatory K‐IFRS adoption on IPO underpricing

Lee¹,

Park

2020

Int. J Fin Econ

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This paper examines whether mandatory Korean International FinancialReporting Standards (K-IFRS) adoption in Korea reduces initial public offering (IPO) underpricing. We find that IPO underpricing has increased following the mandatory adoption of K-IFRS in 2011. We also show that this relation is more pronounced for non-chaebol firms, firms not backed by venture capital, and firms in concentrated industries. This suggests that the negative impact of K-IFRS adoption is concentrated on the firms with a greater pre-adoption information asymmetry. Our results indicate that some policy consideration is needed in order to help investors adapt to the newly adopted standards, especially to those related to firms seeking to go public. (JEL G38, M48).

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Section: Industry Concentrationmentioning

confidence: 83%

The impact of mandatory K‐IFRS adoption on IPO underpricing

Lee¹,

Park

2020

Int. J Fin Econ

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“…Specifically, they find that the representation of independent outsiders on the board decreases with the power of the CEO and increases with the power of outside investors. Kang et al [44] examine the behavior of controlling shareholders of Korean IPO firms, finding that, when controlling shareholders increase their ownership during pre-IPO periods, the probability of insiders selling shares after lockup expirations and the amount sold both increase. The authors interpret the results as evidence that controlling shareholders behave strategically in the IPO process.…”

Section: Board Independence and Venture Capital For Ipo Firmsmentioning

confidence: 99%

The Impact of Corporate Governance Mechanisms on the Commitment of Managers in an IPO Setting: Evidence from Korean Small and Venture Firms

Lee

2022

Sustainability

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Managers’ commitment and dedication crucially affect the sustainable growth of firms. When private companies first offer their shares to the public in an initial public offering (IPO), an IPO lockup is one way of revealing managers’ commitments. IPO lockups are agreements that promise not to sell the shares retained by pre-IPO shareholders for a specified period in the market after the IPO. This paper investigates the impact of corporate governance mechanisms on the length of the lockup period. The paper’s sample consists of IPO firms that have gone public in Korea’s KOSDAQ market, which is a listing venue for small and venture companies. The major findings of this paper are as follows: first, the length of the lockup period increases with the number of outside directors and, second, IPO firms with audit committees have longer lockup periods than those without them. These results indicate that managers of firms with greater board independence choose a longer lockup period when going public. This paper also finds that the lockup period is positively related to the presence of venture capitalists serving as directors of IPO firms, which suggests that venture capital directors may ensure that managers have longer lockups. Overall, these findings suggest that, when small and venture companies go public, managers may use the IPO lockup as a commitment device that complements corporate governance mechanisms in reducing investor concern about the moral hazard problem of managers.

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“…They managed to identify three factors that drove the initial under pricing of ChiNext IPOs: the pre-issue share allocation multiplier from institutional investors (offline oversubscription), issue size (size effect), and the listing day stock market conditions (market momentum). Kang et al (2015) examined the effects of insiders' ownership levels and ownership changes in pre-IPO periods on IPO under pricing and insiders' shareselling behaviours after lock-up expirations, and paying special attention to the form of ownership: direct ownership and indirect ownership through affiliated firms. Their study sample consisted of 669 IPO listed on the Korea Exchange (KRX) and covering a period from January 2000 to November 2011.…”

Section: Other Factorsmentioning

confidence: 99%

A Review of IPO Under-pricing Phenomenon in Asia

Albada

Yong

2020

International Journal of Banking and Finance

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This paper reviews the current status of IPO research in Asia, especially when it comes to the issue of the under-pricing phenomenon. This interest stems from the increasing attention that some of the Asia Pacific region countries have, due to their higher average initial returns in comparison to other developed and developing countries. In this review, we identify the determinants for the high levels of under-pricing as reported in the literature. We find that the regulatory environment of these Asian countries is the most reasonable source for such under-pricing, as it sets it apart from other developed and developing countries.

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Insiders’ Pre-IPO Ownership, Underpricing, and Share-Selling Behavior: Evidence from Korean IPOs

Cited by 6 publications

References 17 publications

The impact of mandatory K‐IFRS adoption on IPO underpricing

The impact of mandatory K‐IFRS adoption on IPO underpricing

The Impact of Corporate Governance Mechanisms on the Commitment of Managers in an IPO Setting: Evidence from Korean Small and Venture Firms

A Review of IPO Under-pricing Phenomenon in Asia

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