REAL ESTATE OWNERSHIP AND ITS IMPACT ON THE UNDERPRICING OF INITIAL PUBLIC OFFERINGS IN SINGAPORE

Abstract

This academic exercise seeks to cast new light on the underpricing phenomenon in the context of the corporate real estate ownership.

Testing a sample of 364 firms that went public on the Singapore Stock Exchange during the period of 2001 to 2008, we find that there is a significant and positive relationship between underpricing and firms that hold corporate real estate on their balance sheets.

In addition, our analysis does not provide sufficient evidence to accept the hypothesis that there is a consistent linear relationship between IPO underpricing and specific corporate real estate type, although we do observe positive and significant coefficient estimates for Office, Industrial and Mixed types of properties. We also find a negative relationship between the debt ratio and corporate real estate ratio of the IPO firms in our sample. Lastly, we test for and do not reject the hypothesis that there is a positive relationship between underpricing and real estate which is pledged as secured collateral.