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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

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.

Suggested Citation

  • Low, Soo-Wah & Yong, Othman, 2011. "Explaining over-subscription in fixed-price IPOs -- Evidence from the Malaysian stock market," Emerging Markets Review, Elsevier, vol. 12(3), pages 205-216, September.
    • Handle: RePEc:eee:ememar:v:12:y:2011:i:3:p:205-216
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    2. Abdolhossein Zameni & Othman Yong, 2017. "Substantial Shareholders and Their Trading Behaviour around Lock-Up Expiry: Evidence from Emerging Markets," Capital Markets Review, Malaysian Finance Association, vol. 25(1), pages 1-18.
    3. Ni, Yensen & Huang, Paoyu, 2015. "Do IPOs matter for price limits? Evidence from Taiwan," The Quarterly Review of Economics and Finance, Elsevier, vol. 58(C), pages 74-83.
    4. Alqahtani, Faisal & Boulanouar, Zakaria, 2017. "Sharia compliance status & investor demand for IPOs: Evidence from Saudi Arabia," Pacific-Basin Finance Journal, Elsevier, vol. 46(PB), pages 258-268.
    5. Ali Albada & Othman Yong & Mohd. Ezani Mat Hassan & Ruzita Abdul-Rahim, 2018. "Retention ratio, lock-up period and prestige signals and their relationship with initial public offering (IPO) initial return: Malaysian evidence," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 14(2), pages 1-23.
    6. Iftikhar Ahmad & Izlin Ismail & Shahrin Saaid Shaharuddin, 2021. "Predictive Role of Ex Ante Strategic Firm Characteristics for Sustainable Initial Public Offering (IPO) Survival," Sustainability, MDPI, vol. 13(14), pages 1-26, July.
    7. Seshadev Sahoo, 2015. "Subscription Rate and Volatility," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 14(1), pages 20-58, April.
    8. Chew Xin-Er & Ng Sin Huei & Ong Tze San & Teh Boon Heng, 2020. "Underpinning Theories of IPO Underpricing: Evidence from Malaysia," International Journal of Asian Social Science, Asian Economic and Social Society, vol. 10(10), pages 560-573, October.
    9. 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 (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 9(1), pages 113-128.
    10. Norliza Che-Yahya & Ruzita Abdul-Rahim, 2015. "Role of Lockup Provision and Institutional Investors in Restricting IPO Flipping Activity: Is There A Moderating Effect of Investor Demand?," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 11(2), pages 1-28.

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