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Explaining mispricing of initial public offerings in Singapore

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  • Beat Reber
  • Caroline Fong
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    Abstract

    This study examines the relative importance of underpricing as a signal of firm value, underwriter certification, subscription levels of shares on offer, and uncertainty surrounding firm value on mispricing of initial public offerings. A sample of 100 Singaporean initial public offerings (IPOs) during the period 1998 to 2000 indicates that subscription levels of shares on offer have the most significant impact on mispricing. This is followed by offer price, market value and trading volume in IPO shares on the first day of trading, and uncertainty surrounding IPO value. Underwriter reputation appears to be only marginally influential, while equity market conditions and industry sector effects seem to be irrelevant in explaining mispricing. Singaporean IPOs have been selected because this is only one of a few markets whose unique institutional characteristics and data availability allows for such a test.

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    Bibliographic Info

    Article provided by Taylor and Francis Journals in its journal Applied Financial Economics.

    Volume (Year): 16 (2006)
    Issue (Month): 18 ()
    Pages: 1339-1353

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    Handle: RePEc:taf:apfiec:v:16:y:2006:i:18:p:1339-1353

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    References

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    1. Kian-Guan Lim & Edward Ng, 1999. "A theory of IPO pricing with tender prices," Applied Financial Economics, Taylor and Francis Journals, vol. 9(5), pages 433-442.
    2. Beat Reber & Bob Berry & Steve Toms, 2005. "Firm resources and quality signalling: evidence from UK initial public offerings," Applied Financial Economics, Taylor and Francis Journals, vol. 15(8), pages 575-586.
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    11. L. Cassia & G. Giudici & S. Paleari & R. Redondi, 2004. "IPO underpricing in Italy," Applied Financial Economics, Taylor and Francis Journals, vol. 14(3), pages 179-194.
    12. Grinblatt, Mark & Hwang, Chuan Yang, 1989. " Signalling and the Pricing of New Issues," Journal of Finance, American Finance Association, vol. 44(2), pages 393-420, June.
    13. Michael Firth, 1998. "IPO profit forecasts and their role in signalling firm value and explaining post-listing returns," Applied Financial Economics, Taylor and Francis Journals, vol. 8(1), pages 29-39.
    14. Ruth Seow Kuan Tan & Li Li Eng & Andrew Khoo, 1999. "The effects of offering method and trading location on the pricing of IPOs in Singapore," Applied Financial Economics, Taylor and Francis Journals, vol. 9(5), pages 491-499.
    15. Jenkinson, Tim & Ljungqvist, Alexander, 2001. "Going Public: The Theory and Evidence on How Companies Raise Equity Finance," OUP Catalogue, Oxford University Press, edition 2, number 9780198295990, September.
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    Cited by:
    1. Vong, Anna P.I. & Trigueiros, Duarte, 2010. "The short-run price performance of initial public offerings in Hong Kong: New evidence," Global Finance Journal, Elsevier, vol. 21(3), pages 253-261.
    2. 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.

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