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Explaining over-subscription in fixed-price IPOs -- Evidence from the Malaysian stock market

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  • Low, Soo-Wah
  • Yong, Othman
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    Abstract

    This paper examines the link between over-subscription and pre-listing information in fixed-price IPOs. We find a strong negative relation between investors' opportunity cost of fund and over-subscription. Since investors are required to make upfront payment at the time of IPO applications, lengthy offer period increases investors' opportunity cost of fund and thus reduces their interests in the IPOs. To increase over-subscription, firms should time their IPOs to coincide with periods of large positive initial returns and low volume of IPO activity. We find that over-subscription is negatively correlated with offer price but is not significantly related to issue size.

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    Bibliographic Info

    Article provided by Elsevier in its journal Emerging Markets Review.

    Volume (Year): 12 (2011)
    Issue (Month): 3 (September)
    Pages: 205-216

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    Handle: RePEc:eee:ememar:v:12:y:2011:i:3:p:205-216

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    Web page: http://www.elsevier.com/locate/inca/620356

    Related research

    Keywords: Initial public offerings Over-subscription Opportunity cost of fund Hot issue market Fixed price mechanism;

    References

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    Cited by:
    1. Ruzita Abdul Rahim & Ros Zam Zam Sapian & Othman Yong & Noor Azryani Auzairy, 2013. "Flipping Activity and Subsequent Aftermarket Trading in Malaysian IPOs," Asian Academy of Management Journal of Accounting and Finance, Penerbit Universiti Sains Malaysia, vol. 9(1), pages 113-128.

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