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Deliberate Discounts and Underpricing of Turkish IPOs

Author

Listed:
  • Lokman Tütüncü

    (Bulent Ecevit University)

  • Elif Acar

Abstract

This study investigates underpricing and deliberate discounts in a unique sample of 113 initial, ublic offerings at Borsa Istanbul. Using pre-issue prospectuses and valuation reports, this study documents the degree of optimism, underwriter discounts and their association with initial returns. We hypothesise that first day returns should be proportional to the percentage discounts offered if value estimates are unbiased and deliberate discounts reflect fair value. The findings indicate that offered discounts are not proportional to the degree of optimism in value estimates, as share prices do not recover on the first day as much as percentage price discounts. Tests also show that optimistic value estimates are associated with larger price discounts and price discounts are negatively related to initial returns.

Suggested Citation

  • Lokman Tütüncü & Elif Acar, 2019. "Deliberate Discounts and Underpricing of Turkish IPOs," Journal of Finance Letters (Maliye ve Finans Yazıları), Maliye ve Finans Yazıları Yayıncılık Ltd. Şti., vol. 34(112), pages 225-240, October.
    • Handle: RePEc:acc:malfin:v:34:y:2019:i:112:p:225-240
    DOI: https://doi.org/10.33203/mfy.469212
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    More about this item

    Keywords

    Initial public offerings; underpricing; deliberate discount; initial return.;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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