The IPO initial returns-aftermarket risk question revisited: evidence from firms in Taiwan
-
DOIhttp://dx.doi.org/10.21511/imfi.16(2).2019.02
-
Article InfoVolume 16 2019, Issue #2, pp. 14-24
- 1050 Views
-
124 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
The purpose of this study is to utilize the Three Stage Least Squares (3SLS) of the simultaneous equation estimation approach to revisit the possible cross relationship between IPO initial returns and aftermarket risk. A structural form equation system of IPO initial returns and aftermarket risk equations is estimated first to obtain the structural form coefficients. The analytically derived reduced form coefficients are then calculated to analyze the net effects of each exogenous variable on two endogenous variables. Major findings of this study are as follows. First, the signs of net effects of all exogenous variables on IPO initial returns and aftermarket risk are the same. In other words, any change in exogenous variables, IPO initial returns and IPO aftermarket risk will change in the same direction, i.e., the higher (lower) the IPO initial returns, the higher (lower) the IPO aftermarket risk. Second, the less the degree of corporate governance, the higher the IPO initial returns and aftermarket risk. Third, the higher the market risk or return before IPO, the higher the IPO initial returns and aftermarket risk.
- Keywords
-
JEL Classification (Paper profile tab)G10, G12, G40
-
References39
-
Tables4
-
Figures0
-
- Table 1. Descriptive statistics for all variables
- Table 2. 3SLS estimation results of IPO initial return structural form equation
- Table 3. 3SLS estimation results of aftermarket risk structural form equation
- Table 4. The analytically derived reduced form coefficients of the 3SLS estimation
-
- Aggarwal, R., & Rivoli, P. (1990). Fads in the Initial Public Offering Market? Financial Management, 19(4), 45-57.
- Baron, D. P. (1982). A Model of the Demand for Investment Banking Advising and Distribution Services for New Issues. Journal of Finance, 37(4), 955-976.
- Beatty, R. P., & Ritter, J. R. (1986). Investment Banking, Reputation, and the Underpricing of Initial Public Offerings. Journal of Financial Economics, 15(1-2), 213-232.
- Booth, J. R., & Smith, R. L. (1986). Capital Raising, Underwriting and the Certification Hypothesis. Journal of Financial Economics, 15(1-2), 261-281.
- Boulton, T. J., Smart, S. B., & Zutter, C. J. (2017). Conservatism and International IPO Underpricing. Journal of International Business Studies, 48(6), 763-785.
- Bouzouita, N., Gajewski, J., & Gresse, C. (2015). Liquidity Benefits from IPO Underpricing: Ownership Dispersion or Information Effect. Financial Management, 44(4), 785-810.
- Brennan, M. J., & Franks, J. (1997). Underpricing, Ownership and Control in Initial Public Offerings of Equity Securities in the UK. Journal of Financial Economics, 45(3), 391-413.
- Carter, R., & Manaster, S. (1990). Initial Public Offerings and Underwriter Reputation. Journal of Finance, 45(4), 1045-1067.
- Cassia, L., Giudici, G., Paleari, S., & Redondi, R. (2004). IPO Underpricing in Italy. Applied Financial Economics, 14(3), 179-194.
- Chalk, A. J., & Peavy, J. W. (1987). Initial Public Offerings: Daily Returns, Offering Types, and the Price Effect. Financial Analysts Journal, 43(5), 65-69.
- Chanine, S., Filatotchev, I., & Wright, M. (2007). Venture Capitalists, Business Angels, and Performance of Entrepreneurial IPOs in the UK and France. Journal of Business Finance and Accounting, 34(3-4), 505-528.
- Chemmanur, T. J. (1993). The Pricing of Initial Public Offerings: A Dynamic Model with Information Production. The Journal of Finance, 48(1), 285-304.
- Chowdhry, B., & Nanda, V. (1996). Stabilization, Syndication, and Pricing of IPOs. Journal of Financial and Quantitative Analysis, 31(1), 25-42.
- Davidson, R., & MacKinnon, J. G. (1989). Testing for Consistency Using Artificial Regressions. Econometric Theory, 5(3), 363-384.
- Davidson, R., & MacKinnon, J. G. (1995). Estimation and Inference in Econometrics. Econometric Theory, 11(3), 631-635.
- Deng, Q., & Zhou, Z. (2016). Overreaction in ChiNext IPOs’ Initial Returns: How Much and What Caused It? Emerging Markets Review, 29, 82-103.
- Gleason, K., Johnston, J., & Madura, J. (2008). What Factors Drive IPO Aftermarket Risk? Applied Financial Economics, 18(13-15), 1099-1110.
- Gompers, P. A. (1996). Grandstanding in the Venture Capital Industry. Journal of Financial Economics, 42(1), 133-156.
- Hausman, J. A. (1978). Specification Tests in Econometrics. Econometrica, 46(6), 1251-1271.
- Komenkul, K., Sherif, M., & Xu, B. (2017). IPOs’ Signalling Effects for Speculative Stock Detection: Evidence from the Stock Exchange of Thailand. Applied Economics, 49(31), 3067-3085.
- Lee, J. S. (2008). The Determinants of IPO Underpricing: Application of Quantile Regression. Review of Securities & Futures Markets, 20(1), 47-100 (published in Chinese).
- Lee, P. J., Taylor, S. L., & Walter, T. S. (1996). Australian IPO Pricing in the Short and Long Run. Journal of Banking and Finance, 20(7), 1189-1210.
- Lin, C. J., & Chang, C. C. (2009). Abnormal Change of Board Members, Family Firms and Fraud. The International Journal of Accounting Studies, 48, 1-33 (published in Chinese).
- Ma, T., & Hu, T. C. (2003). The Determination of Underwriting Mechanisms and It’s Impact on IPO Discount: Auction, Book-building and Fixed Price. Journal of Financial Studies, 11(1), 1-40 (published in Chinese).
- Malhotra, M., & Nair, M. (2105). Initial Public Offerings’ Underpricing: A Study on the Short Run Price Performance of Book-Built IPOs in India. Paripex-Indian Journal of Research, 4(2), 8.
- Peng, Y., & Wang, K. (2007). IPO Underpricing and Floatation Methods in Taiwan: A Stochastic Frontier Approach. Applied Economics, 39(19-21), 2785-2796.
- Pettway, R. H., Thosar, S., & Walker, S. (2008). Auctions Versus Book-built IPOs in Japan: A Comparison of Aftermarket Volatility. Pacific-Basin Finance Journal, 16(3), 224-235.
- Raharja, B., Suhaeli, D., & Mranani, M. (2017). Research of the Stock Price Overreaction and Investor Overconfidence Issues. Business, Management and Education, 15, 127-139.
- Ritter, J. R. (1984). The “Hot Issue” Market of 1980. Journal of Business, 57(2), 215-240.
- Ritter, J. R. (1991). The Long-run Performance of Initial Public Offerings. Journal of Finance, 46(1), 3-27.
- Rock, K. (1986). Why New Issues Are Underpriced. Journal of Financial Economics, 15(1-2), 187-212.
- Ruud, J. S. (1993). Underwriter Price Support and the IPO Underpricing Puzzle. Journal of Financial Economics, 34(2), 135-151.
- Sherman, A. E. (2005). Global Trends in IPO Methods: Book Building versus Auctions with Endogenous Entry. Journal of Financial Economics, 78(3), 615-649.
- Smith, C. W. Jr. (1986). Investment Banking and the Capital Acquisition Process. Journal of Financial Economics, 15(1-2), 3-29.
- Vakrman, T., & Kristoufek, L. (2015). Underpricing, Underperformance and Overreaction in Initial Public Offerings: Evidence from Investor Attention Using Online Searches. Springerplus, 4, 84.
- Welch, I. (1989). Seasoned Offerings, Imitation Costs, and the Underpricing of Initial Public Offerings. Journal of Finance, 44(2), 421-449.
- Yeh, Y., Shu, P., & Guo, R. (2008). Ownership Structure and IPO Valuation Evidence from Taiwan. Financial Management, 37(1), 141-161.
- Yu, T., & Tse, Y. K. (2006). An Empirical Examination of IPO Underpricing in the Chinese A-share Market. China Economic Review, 17(4), 363-382.
- Zhou, L., & Sadeghi, M. (2019). The Impact of Innovation on IPO Short-term Performance – Evidence from the Chinese Markets. Pacific-Basin Finance Journal, 53, 208-235.
-
The impact of listing on banks’ performance: case study from Saudi Arabia
Mohammad Alsharif
doi: http://dx.doi.org/10.21511/bbs.15(3).2020.01
Using quarterly data from 2010 to 2019, this paper investigates the impact of listing status on the performance of the National Commercial Bank (NCB), the largest commercial bank in Saudi Arabia, by applying a combination of financial ratios analysis and efficient frontier analysis with a mix of parametric and non-parametric tests. The overall results show that although the NCB performance is superior compared to their counterparts, this superiority has deteriorated after the bank was listed in 2014. This result was captured by the deterioration in the efficiency measures of NCB, indicating the significance of using the efficient frontier analysis as an additional monitoring tool by the Saudi regulators. The financial ratios analysis also shows that even though the NCB profitability has increased, there is an increase in the bank’s overall risk after being listed. Therefore, Saudi regulators should closely monitor their listed banks as these banks are directed toward high-risk assets.
-
Performance analysis of healthcare-focused special purpose acquisition companies
Gimede Gigante ,
Daniele Notarnicola
doi: http://dx.doi.org/10.21511/imfi.18(4).2021.14
Investment Management and Financial Innovations Volume 18, 2021 Issue #4 pp. 150-165 Views: 647 Downloads: 365 TO CITE АНОТАЦІЯThe Covid-19 pandemic has accelerated some structural changes in the healthcare industry, and several health-tech start-ups thrived by providing innovative solutions to the challenges imposed by the pandemic. To finance their growth, many of these companies went through mergers with Special Purpose Acquisition Companies (SPACs). The paper investigates the market performance of healthcare-focused US-listed SPACs. The study aims to analyze the returns that healthcare SPACs offer to their investors and ascertain the determinants that drive these returns over a sample of 33 SPACs that merged with a healthcare firm between 2018 and 2021. Linear regression is employed to identify the drivers of SPACs’ market performance. Portfolio analysis is also performed and compared against the Russell 2000 and the S&P500 Healthcare Indexes.
The first outcome accomplished by the analysis is that a portfolio made of healthcare-SPACs underperforms small-cap firms by 2.14% and the healthcare industry by 6.72% over a two-year period, even if the difference in the returns of the healthcare SPACs portfolio and the two benchmarks is not statistically significant. Moreover, a high level of redemptions, the presence of serial SPAC sponsors, cross-border deals, private equity and venture capital funds as sellers, and a high percentage of boutique investment banks among the sell-side advisors seem to negatively affect the returns of healthcare-focused SPACs with a significance level of at least 10%. Instead, a larger number of buy-side advisors appears to be beneficial for healthcare-focused SPACs’ market performance.
