Offering methods and issuer-oriented underpricing costs: Evidence from the Hong Kong IPO market

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• 作者：Khelifa Mazouz ; Brahim Saadouni ; Shuxing Yin
• 关键词：Hong Kong initial public offerings ; Offering methods ; Issuer underpricing cost ; Interest on application funds
• 刊名：Journal of International Financial Markets, Institutions & Money
• 出版年：2009
• 出版时间：December 2009
• 年：2009
• 卷：19
• 期：5
• 页码：937-949
• 全文大小：176 K

文摘

We extend Leung and Menyah's (2006) study by relating the estimation of the issuer-oriented underpricing costs to the IPO offering methods. We distinguish between the oversubscription rates of institutional and retail investors in the estimation of the issuer-oriented underpricing costs associated with the pure fixed price, fixed price and bookbuilding IPOs. Leung and Menyah show that the issuer underpricing cost of new share issues (U_N) averages about 14 % of the headline underpricing. This average drops to about 7 % after accounting for the interest income from application funds (R_AF). In this study, we show that the mean of U_N is about 16 % (11 % ) of the headline underpricing before (after) accounting for the R_AF. We report also evidence that the U_N and the R_AF depend on the IPO offering method. The U_N of the pure fixed price, fixed price and bookbuilding IPOs represent 15.60 % , 4.61 % and 18.07 % of the headline underpricing, respectively. These averages fall to 12.54 % , −4.17 % and 16.67 % after accounting for the R_AF. Our conclusions are robust across different time periods.