WHY EXTREME UNDERPRICINGS OCCURRED? EVIDENCE FROM JAPANESE IPO MARKET

Authors : Berna KIRKULAK

Pages : 0-0

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Publication Date : 2004-06-01

Article Type : Other Papers

Abstract :This paper empirically examines the determinants of increase in the first day return of Japanese initial public offerings (IPOs) during 1997-2001 in TSE, Jasdaq, Mothers, Hercules (former Nasdaq Japan) and regional stock exchange markets. Initial return investigation focuses on pre-market conditions during the filing procedures. The findings show that the highest limit stocks are positively correlated with initial returns. The boom of high-tech IPO firms affects pre-market activities and high initial returns make pre-markets competitive for underwriters. Further analysis confirms that shareholders avoid wealth losses by offering few shares due to high underpricing expectations.
Keywords : Initial Offer Pricing, Underpricing