Initial Public Offerings (IPO)

Initial Public Offerings (IPO), 1st Edition

Initial Public Offerings (IPO), 1st Edition,Greg Gregoriou,ISBN9780750679756






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Leading researchers from around the world present research on real results over the past 7 years

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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


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.


Researchers and academics in Finance

Greg Gregoriou

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

View additional works by Greg N. Gregoriou

Initial Public Offerings (IPO), 1st Edition

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

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

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

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

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

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

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

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

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

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
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

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

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

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

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

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

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

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

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

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

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

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

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

Quotes and reviews

"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
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