Initial Public Offerings (IPO) - 1st Edition - ISBN: 9780750679756, 9780080461670

Initial Public Offerings (IPO)

1st Edition

An International Perspective of IPOs

Authors: Greg N. Gregoriou
eBook ISBN: 9780080461670
Hardcover ISBN: 9780750679756
Paperback ISBN: 9781493303205
Imprint: Butterworth-Heinemann
Published Date: 2nd December 2005
Page Count: 464
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Table of Contents

Part One
Performance of IPOs 1 Nasdaq IPO around the market peak in 2000 Niklas Wagner 1.1 Introduction 1.2 Literature review 1.3 The Nasdaq IPO dataset 1.3.1 Data sources 1.3.2 The sample 1.3.3 Hot and cold subsamples 1.3.4 Company characteristics 1.3.5 Nasdaq IPO returns 1.3.6 Initial returns 1.3.7 Long-run returns 1.4 Conclusion Acknowledgments References

2 Returns to style investments in Initial Public Offers Kojo Menyah and Krishna Pauydal 2.1 Introduction 2.2 Prior studies on investment styles and their returns 2.3 Data, sample and empirical methods 2.3.1 Data 2.3.2 Characteristics of the sample 2.3.3 Compositrion of style portflios 2.3.4 Empirical models 2.4 Empirical evidence 2.4.1 Returns to value and growth styles 2.4.2 Returns to size-based style investments 2.4.3 Returns to underwriter quality style investments 2.4.4 Bivariate analysis 2.4.5 Test of robustness of results 2.5 Conclusion

3 The long-run performance of Taiwan’s IPOs conditioning characteristics: evidence from efficiently learning markets Anlin Chen, Sue L. Chiou and Chinshun Wu 3.1 Introduction 3.2 Data 3.3 Measuring IPO performance under efficient marklets hypothesis 3.3.1 Using market return as benchmark and neglecting hidden information behind price limits 3.3.2 Using market return as benchmark and simulating the latent true prices behind price limits 3.4 IPO performance under efficiently learning markets 3.4.1 Using market return and benchmark without taking the hidden information behind price limits into account 3.4.2 Using the Fama-French return as benchmark and simulating the hidden information behind the price limits 3.5 Long-run performance conditioning on issue characteristics 3.5.1 IPO long-run performance conditioning on IPO method 3.5.2 IPO long-run performance conditioning on undepricing and the length of the waiting time to issue subsequent offerings 3.5.3 IPO long-run performance conditioning on hot-issue period and industry 3.6 Conclusion Acknowledgments References

4 Short and long-run performance of IPOs traded on the Istanbul stock exchange Mehmet Orhan 4.1 Introduction 4.2 IPO performance 4.3 Testing for the structural chnage of the CAPM at the 2001 economic crisis of Turkey 4.4 Long-run relationship of the CAPM 4.5 Conclusion References

5 Indexing the IPO sector with IPOX™ indices Josef A. Schuster 5.1 Introduction 5.2 Why are IPOs unique? The academic perspective 5.3 IPOX indices methodology 5.4 IPOX indices analytics 5.5 Conclusion References

6 The size effect of firm’s going public on the Spanish capital market Susana Alvarez-Otero and Victor M. Gonzalez-Mendez 6.1 Introduction 6.2 Database 6.3 Effect of the firm’s size on underpricing: long-term performance and the firm’s performance 6.3.1 Intial underpricing and size 6.3.2 Long-term performance and size 6.3.3 Firm’s performance and size 6.4 Conclusion

7 Earnings management and the lomg-run performance of Spanish inital public offerings Maria J. Pastor-LLorca and Francisco Poveda-Fuentes
7.1 Introduction 7.2 Sample and data sources 7.3 Post-offering stock return performance 7.4 Measuring earnings managment 7.4.1 Cross-sectional approach Modified Jones model in cross-section Poveda model in cross-section 7.4.2 Panel data approach 7.4.3 Performance matched abnormal accruals 7.5 Earnings management in initial public offerings 7.5.1 ROA evolution in IPO firms 7.5.2 Matched performance abnromal accruals in IPO firms 7.5.3 Earnings management and subsequent ROA reversals in IPO firms 7.6 Earnings manageemnt and post-offering stock return underperformance 7.6.1 Post-IPO returns by performance matched abnormal accruals terciles 7.6.2 Post-IPO retuns and earnings management: regression analysis 7.7 Conclusion References

8 IPO Intial returns on European “new markets“ Giancarlo Giudici and Peter Roosenboom 8.1 Introduction 8.2 Review of the Literature 8.3 Data and sample description 8.4 Hypothesis and varibale measurement 8.5 Empirical results 8.6 Conclusion References

9 Efficiency of U.S. Internet IPOs: a data envelopment analysis approach Greg N. Gregoriou and Maher Kooli 9.1 Introduction 9.2 Data 9.3 Methodology 9.4 Empirical results 9.5 Conclusion Acknowledgments References

Part Two IPO Underpricing: International Evidence
10 Generalzing the winner’s curse hypothesis: the case of the Belgian IPO market Michel Boelen and Georges Hübner 10.1 Introduction 10.2 Data and methodology 10.2.1 Data 10.2.2 Methodology 10.3 Empirical results 10.3.1 Raw underevaluation of IPOs 10.3.2 Profitability of systematic subscription strategies over the whole period (1989-2004) 10.3.3 Profitability of conditional subscription strategies Investment in bullish markets Invesmtnet in bookbuilding-based IPOs Investment in IPOs proposing new shares A combined strategy 10.4 Conclusion Acknowledgments References Appendix

11 Flipping activity in fixed offer price mechanism allocated IPOs Dimitrios Gounopoulos 11.1 Introduction 11.2 Methodology and sample description 11.3 Descriptive results on flipping 11.3.1 Institutional versus individual allocation and flipping by filing range and intial returns 11.3.2 Type of lead udnerwriter, allocations and flipping activity 11.4 Specification of the models 11.4.1 Explanation of control variables 11.5 Cross ectional regression results 11.6 Conclusion References

12 Getting the IPO right: viva la France? Edel Barnes 12.1 Introduction 12.2 IPO pricing methods 12.3 IPOs and the French stock market 12.4 Study motivations, data and analysis 12.5 Results and discussion 12.6 Conclusion Acknowledgments References 13 Underpricing and the aftermarket performance of inital public offerings: the case of Austria Wolfgang Aussenegg 13.1 Introduction 13.2 The new issue market in Austria 13.3 Data description 13.4 Intial returns 13.4.1 Research methodology 13.4.2 Distribution 13.4.3 Hypotheses to explain the level of underpricing 13.4.4 Allocation (winder’s curse) hypothesis 13.4.5 Ex-ante uncertainty hypothesis 13.4.6 Underwriter reputation hypothesis 13.4.7 Signalling hypothesis 13.4.8 Regression analysis 13.5 Aftermarket performance 13.5.1 Research design 13.5.2 Short-run performance 13.5.3 Long-run performance 13.5.4 Possble explanations for the observed long-run performance 13.5.5 Regression analysis 13.6 Conclusion Acknowledgments References

14 The hot-issue period in Germany-what factors drove IPO underpricing? Stefan Guenther and Marco Rummer 14.1 Introduction 14.2 Related research 14.2.1 The basics of IPOs, bookbuilding and underpricing 14.2.2 The hot-issue period 14.2.3 Underpricing 14.2.4 Long-run underperformance 14.3 The dataset 14.3.1 German market features 14.3.2 Data sources 14.4 Empirical analysis 14.4.1 Descriptive statistics 14.4.2 Underpricing by sectors and segments 14.4.3 Average underpricing and issuing activity 14.4.4 Underpricing and long-run underperformance 14.4.5 Cross-sectional regression 14.4.6 Ex-ante uncertainty 14.4.7 Investor sentiment 14.4.8 Agency conflicts 14.4.9 Robustness 14.5 Conclusion Acknowledgments References

15 Reassessing Canadian IPO underpricing: evidence from common share, capital pool company and unit offering Maher Kooli 15.1 Introduction 15.2 Background and hypothesis development 15.2.1 Size and underpricing 15.2.2 Role of underwriter and underpricing 15.2.3 IPO market conditions and underpricing 15.3 Data and methodology 15.4 Results 15.4.1 The underpricing phenomenon in Canada 15.4.2 Cross sectional patterns 15.4.3 Size 15.4.4 Industry 15.4.5 Underwriter reputation 15.4.6 Market conditions 15.5 Conclusion and Policy Implications References

16 IPO Underpricing and ownership structure: evidence from the Istanbul stock exchange M. Banu Durukan 16.1 Intoduction 16.2 Theoretical background 16.3 Sampe and data 16.4 Empirical Findings 16.5 Conclusion Acknowledgments References

Part Three Corporate Strucuture and IPO Evaluation
17 IPOs and earnings management in Germany Tereza Tykvova 17.1 Introduction 17.2 Data 17.3 Methodology of Accrual Measurement 17.4 DCA by fiscal years 17.5 Earnings management and stock performance 17.6 Conclusion Acknowledgments

18 Signaling and the valuation of IPOs: regression tests Steven Xiaofan Zheng 18.1 Introduction 18.2 Regression model misspecification 18.3 Simulated regressions 18.4 Correcting the misspecification 18.4.1 Alternative explanations 18.5 Conclusion References

19 The role of venture capitalists in IPO performance: emprical evidence from Germany Andreas Hack and Erik E. Lehmann 19.1 Introduction 19.2 Venture capitalists as shareholders and IPO returns 19.3 Data, measurement and estimation methods 19.4 Descriptive statistics and empirical results 19.5 Conclusion References

20 Ownership structure and intial public offerings in Portugal José Miguel Almeida and João Duque 20.1 Introducution 20.2 Reasons and findings around initial public offering patterns 20.3 Data and methodology 20.4 Empirical results 20.5 Conclusion Acknowledgments References

Part Four
Bookbuilding, Listing and Underwriting 21 Bookbuilding and shre pre-allocation in IPOs Nancy Huyghebaert and Cynthia Van Hulle
21.1 Introduction 21.2 Theory and hypotheses 21.2.1 The role of bookbuilding in reducing information assymmetries 21.2.2 Motives underlying share pre-allocation in IPOs 21.3 Sample selection and description 21.4 Empirical results on bookbuilding and pre-allocation decisions 21.4.1 Determinants of using bookbuilding 21.4.2 Determinants of share pre-allocation 21.5 Effects on underpricing and stock liquidity 21.5.1 Impact of bookbuilding and share pre-allocation on underpricing 21.5.2 Impact of bookbuilding and share pre-allocation on stock liquidity 21.6 Conclusion Acknowledgments

22 Costs and benefits in the choice of the audit and underwriting qualitiy in the IPO market: an empirical analysis of competing theories Joseph Aharony, Ran Barniv and Chan-Jane Lin 22.1 Introduction 22.2 Contribution to the literature 22.3 Supply-side and demand side hypotheses 22.4 Data and sample statistics 22.5 Research method 22.5.1 Firm-specific rsk measures 22.5.2 Testing the supply-side and demand-side hypothesis 22.6 Results 22.6.1 Supply-side indicators 22.6.2 Demand-side indicators 22.7 Conclusion Acknowledgments References

23 Siamese Twins and Virtual Mergers: Dual Listed Companies in Australia Paul Ali 23.1 Introduction 23.2 Dual listed compnaies 23.2.1 A brief hsitroy of dual listed companies 23.2.2 The dual listed compnaies structure 23.2.3 Combined entities structure 23.2.4 Separate entities structure 23.2.5 Stapled securities strucuture 23.2.6 Contratcual arrangements 23.2.7 Why use the dual liasted companies strucuture? 23.3 Some legal issues 23.4 Conclusion Acknowledgments References

24 Equity issuance trends in Australia’s listed investment fund markets Martin Gold 24.1 Overview 24.2 Institutional details and market structure 24.2.1 Demand factors 24.2.2 Poor absolute performance of mutual funds 24.2.3 Growth of self managed pension funds 24.2.4 Strategy differentiation and effective diversification 24.2.5 Choice and investor-directed platforms 24.2.6 Fees and expenses-distribution costs of mutual funds industry model
24.2.7 Incresing investor emphasis on post-tax economic returns 24.3 Supply-factors 24.3.1 Rationalization, scale building, and business model diversification by fund managers 24.3.2 The increasing popularity of boutique fund managers 24.3.3 Good market-timing and statistical fillips 24.3.4 Concerted efforts to expand the listed investment fund market 24.4 Recent issuance trends 24.5 Performance of listed funds sector including recent fund IPOs 24.5.2 NTA discount and premiums of the Australian shares listed funds sector 24.6 Return performance of recent listed investment fund IPOs 24.7 Conclusion References

25 Do underwriters create value for issuers by subjectively determining offer prices? Steve Dolvin 25.1 Introduction 25.2 Background 25.2.1 The role of the udnerwriter 25.2.2 Obective pricing methods 25.3 Data summary statistics 25.3.1 Statistrics by underwriter quality level 25.3.2 residual income model sample 25.4 Determiningoffer prices 25.4.1 Full information price 25.4.2 Residual income model evaluation 25.4.3 Price ratio analysis 25.5 Conclusion Appendix References


After the cooling off of IPOs since the dot com bubble, Google has rekindled the fire for IPOs. This IPO reader contains new articles exclusive to this reader by leading academics from around the world dealing with quantitative and qualitative analyses of this increasingly popular and important area of finance. Articles address new methods of IPO performance, international IPOs, IPO evaluation, IPO underwriting, evaluation and bookbuilding. Although numerous articles are technical in nature, with econometric and statistical models, particular attention has been directed towards the understanding and the applicability of the results as well as theoretical development in this area. This reader will assist researchers, academics, and graduate students to further understand the latest research on IPOs.

Key Features

Interest in IPOs is increasing again after the Google IPO, and IPOs are up significantly from last year Chapters by well known academics provide an international perspective, describing research results from IPO data in countries spanning the globe *Research is based on real results from IPO data collected over the past 5-7 years


Researchers and academics in Finance


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"Gregoriou once again offers us a collection of insightful and informative scientific articles. This reader covers the many interesting facets of IPOs, including performance studies in different countries, analysis of the underpricing phenomenon, as well as the role of the underwriters and the corporate structure on IPO valuations. The articles, written by both practitioners and academics, provide rigorous empirical analysis and offer intuitive conclusions. A great read for IPO aficionados!" -- Nicolas Papageorgiou, Assistant Professor of Finance, HEC Montreal "This collection of new articles on IPOs is literally a must-have handbook for investors, academics, and traders worldwide interested in studying IPO performance. The articles focus on IPOs on an international level thereby allowing the reader to compare the performance of IPOs in many countries. Initial Public Offerings truly adds to the existing IPO literature with a list of well known academics/contributors in the field of IPOs. This book truly presents the latest cutting edge research on European IPOs, Asian IPO and IPOs in other countries." --Komlan Sedzro, Professor of Finance, University of Quebec at Montreal "Now, whilst the IPO market is relatively calm,is a good period for some academic analysis of this phenomenon,and the idea of a global approach is highly innovative.The result is a wide-ranging and accesible book,that will be a valued reference work for scholars and practitioners." -- Dr. Stephen E. Satchell, University Reader, Cambridge University; Fellow, Trintiy College "This collection of timely articles provides further empirical evidence on the well-known IPO underpricing and long-run underperformance phenomena from a range of countries that differ in their market structures and regulatory environments. This wealth of new evidence will no doubt stimulate further work in the area." -- Alexander Ljungqvist, Associate Professor of Finance, Stern School of Business, New York University

About the Authors

Greg N. Gregoriou Author

A native of Montreal, Professor Greg N. Gregoriou obtained his joint Ph.D. in finance at the University of Quebec at Montreal which merges the resources of Montreal's four major universities McGill, Concordia, UQAM and HEC. Professor Gregoriou is Professor of Finance at State University of New York (Plattsburgh) and has taught a variety of finance courses such as Alternative Investments, International Finance, Money and Capital Markets, Portfolio Management, and Corporate Finance. He has also lectured at the University of Vermont, Universidad de Navarra and at the University of Quebec at Montreal.

Professor Gregoriou has published 50 books, 65 refereed publications in peer-reviewed journals and 24 book chapters since his arrival at SUNY Plattsburgh in August 2003. Professor Gregoriou's books have been published by McGraw-Hill, John Wiley & Sons, Elsevier-Butterworth/Heinemann, Taylor and Francis/CRC Press, Palgrave-MacMillan and Risk Books. Four of his books have been translated into Chinese and Russian. His academic articles have appeared in well-known peer-reviewed journals such as the Review of Asset Pricing Studies, Journal of Portfolio Management, Journal of Futures Markets, European Journal of Operational Research, Annals of Operations Research, Computers and Operations Research, etc.

Professor Gregoriou is the derivatives editor and editorial board member for the Journal of Asset Management as well as editorial board member for the Journal of Wealth Management, the Journal of Risk Management in Financial Institutions, Market Integrity, IEB International Journal of Finance, and the Brazilian Business Review. Professor Gregoriou's interests focus on hedge funds, funds of funds, commodity trading advisors, managed futures, venture capital and private equity. He has also been quoted several times in the New York Times, Barron's, the Financial Times of London, Le Temps (Geneva), Les Echos (Paris) and L'Observateur de Monaco. He has done consulting work for numerous clients and investment firms in Montreal. He is a part-time lecturer in finance at McGill University, an advisory member of the Markets and Services Research Centre at Edith Cowan University in Joondalup (Australia), a senior advisor to the Ferrell Asset Management Group in Singapore and a research associate with the University of Quebec at Montreal's CDP Capital Chair in Portfolio Management. He is on the advisory board of the Research Center for Operations and Productivity Management at the University of Science and Technology (Management School) in Hefei, Anhui, China.

Affiliations and Expertise

School of Business and Economics, State University of New York, Plattsburgh, NY, USA