Please use this identifier to cite or link to this item: https://scholarbank.nus.edu.sg/handle/10635/170425
Title: INITIAL PUBLIC OFFERING (IPOS) : DOES THE INITIAL RETURN ON IPOS ACCRUE TO SUCCESSFUL SUBSCRIBERS ONLY?
Authors: TAN SEI MENG
Issue Date: 1994
Citation: TAN SEI MENG (1994). INITIAL PUBLIC OFFERING (IPOS) : DOES THE INITIAL RETURN ON IPOS ACCRUE TO SUCCESSFUL SUBSCRIBERS ONLY?. ScholarBank@NUS Repository.
Abstract: This study investigates whether only successful subscribers benefit from the large and positive average initial return on Initial Public Offerings (IPOs ). For theories that support the underpricing explanation like Rock (1986), Baron (1982), Hensler (1990) and Lam (1991, 1992), it is pertinent that the large and positive average initial return on IPOs due to the "underpricing" accrues to successful subscribers only. Traditional research on IPOs has not addressed this issue directly because offer-to-close initial return is often the computed measure in these empirical studies. We resolve the issue of who really benefits from the initial return on IPOs by examining the first day opening price data of 64 IPOs listed on the Stock Exchange of Singapore (SES) over the 1975 to 1992 period. We show that virtually all of the initial average return on IPOs is captured at the opening transaction. This implies that only successful subscribers benefit from the large and positive average initial return on IPOs. This Academic Exercise also finds evidence of a change in market characteristics of the local IPO market - first day prices of IPOs listed during bullish market conditions have become more volatile than IPOs listed during bearish conditions in recent years. This finding is inconsistent with the results of Lockwood and Mclnish (1990), who find that intraday returns are significantly more volatile during bear markets.
URI: https://scholarbank.nus.edu.sg/handle/10635/170425
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