Unintended regulatory consequences: Evidence from the Korean IPOs
We examine IPOs in Korea during the period August 2000–January 2002. We conclude that the high level of underpricing in Korean IPOs is the unintended consequence of regulations designed to promote fairness. Two aspects of the regulations distort the process — an “essential price” formula that severely understates the value of the firm; and, bid exclusion rules that give investors a strong incentive to cluster their bids so as to avoid being excluded from the offering. During our sample period the rules were changed somewhat. The result was a change to gaming behavior and somewhat less underpricing.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hanley, Kathleen Weiss, 1993. "The underpricing of initial public offerings and the partial adjustment phenomenon," Journal of Financial Economics, Elsevier, vol. 34(2), pages 231-250, October.
- Kerins, Frank & Kutsuna, Kenji & Smith, Richard, 2007. "Why are IPOs underpriced? Evidence from Japan's hybrid auction-method offerings," Journal of Financial Economics, Elsevier, vol. 85(3), pages 637-666, September.
- Tim Jenkinson & Howard Jones, 2004.
"Bids and Allocations in European IPO Bookbuilding,"
Journal of Finance,
American Finance Association, vol. 59(5), pages 2309-2338, October.
- Yao-Min Chiang & Yiming Qian & Ann E. Sherman, 2010. "Endogenous Entry and Partial Adjustment in IPO Auctions: Are Institutional Investors Better Informed?," Review of Financial Studies, Society for Financial Studies, vol. 23(3), pages 1200-1230, March.
- Bruno Biais & Peter Bossaerts & Jean-Charles Rochet, 2002.
"An Optimal IPO Mechanism,"
Review of Economic Studies,
Oxford University Press, vol. 69(1), pages 117-146.
- Xiaoding Liu & Jay R. Ritter, 2010. "The Economic Consequences of IPO Spinning," Review of Financial Studies, Society for Financial Studies, vol. 23(5), pages 2024-2059.
- Hao, Qing, 2007. "Laddering in initial public offerings," Journal of Financial Economics, Elsevier, vol. 85(1), pages 102-122, July.
- Thomas J. Chemmanur & Gang Hu & Jiekun Huang, 2010. "The Role of Institutional Investors in Initial Public Offerings," Review of Financial Studies, Society for Financial Studies, vol. 23(12), pages 4496-4540, December.
- Francesca Cornelli, 2001. "Bookbuilding and Strategic Allocation," Journal of Finance, American Finance Association, vol. 56(6), pages 2337-2369, December.
- Aggrawal, Reena & Prabhala, Nagpurnanand & Puri, Manju, 2002. "Institutional Allocation in Initial Public Offerings: Empirical Evidence," Research Papers 1747, Stanford University, Graduate School of Business.
- Francesca Cornelli & David Goldreich, 2003. "Bookbuilding: How Informative Is the Order Book?," Journal of Finance, American Finance Association, vol. 58(4), pages 1415-1443, 08.
- Stoughton, Neal M. & Zechner, Josef, 1998. "IPO-mechanisms, monitoring and ownership structure," Journal of Financial Economics, Elsevier, vol. 49(1), pages 45-77, July.
- Benveniste, Lawrence M. & Spindt, Paul A., 1989. "How investment bankers determine the offer price and allocation of new issues," Journal of Financial Economics, Elsevier, vol. 24(2), pages 343-361.
- Mello, Antonio S. & Parsons, John E., 1998. "Going public and the ownership structure of the firm," Journal of Financial Economics, Elsevier, vol. 49(1), pages 79-109, July.
- Biais, Bruno & Faugeron-Crouzet, Anne Marie, 2002.
"IPO Auctions: English, Dutch, ... French, and Internet,"
Journal of Financial Intermediation,
Elsevier, vol. 11(1), pages 9-36, January.
- Biais, Bruno & Faugeron-Crouzet, Anne-Marie, 2000. "IPO Auctions: English, Dutch, ... French and Internet," IDEI Working Papers 104, Institut d'Économie Industrielle (IDEI), Toulouse.
- Reena Aggarwal & Nagpurnanand R. Prabhala & Manju Puri, 2002. "Institutional Allocation In Initial Public Offerings: Empirical Evidence," NBER Working Papers 9070, National Bureau of Economic Research, Inc.
- Kandel, Shmuel & Sarig, Oded & Wohl, Avi, 1999. "The Demand for Stocks: An Analysis of IPO Auctions," Review of Financial Studies, Society for Financial Studies, vol. 12(2), pages 227-247.
- Kao, Jennifer L. & Wu, Donghui & Yang, Zhifeng, 2009. "Regulations, earnings management, and post-IPO performance: The Chinese evidence," Journal of Banking & Finance, Elsevier, vol. 33(1), pages 63-76, January.
- Lowry, Michelle & Schwert, G. William, 2004. "Is the IPO pricing process efficient?," Journal of Financial Economics, Elsevier, vol. 71(1), pages 3-26, January.
- Yong, Othman, 2007. "A review of IPO research in Asia: What's next?," Pacific-Basin Finance Journal, Elsevier, vol. 15(3), pages 253-275, June.
- Sherman, Ann E., 2005. "Global trends in IPO methods: Book building versus auctions with endogenous entry," Journal of Financial Economics, Elsevier, vol. 78(3), pages 615-649, December.
When requesting a correction, please mention this item's handle: RePEc:eee:pacfin:v:20:y:2012:i:2:p:292-309. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
If references are entirely missing, you can add them using this form.