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Exploring the Existence of Short-run Initial Public Offering (IPO) Underpricing at Three Different Stock Exchange Markets in Japan

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  • Yoshiki Shimizu

  • Hideki Takei

Abstract

This study conducted the examination of the short-run performance of IPO stocks in the Japanese market by measuring daily AAR/CAAR of sample IPO stocks.. The study did so, in order to detect the positive initial abnormal return of sample IPO stocks as well as the short-run IPO underpricing that was observed by Ibbotson (1975) and McDonald and Fisher (1972) in the US market, and Chang (2011) in the Taiwanese market. The finding was that unlike findings in prior research, this study did not discover the positive initial abnormal returns for sample IPO firms in the Japanese market on the event day with statistical significance. Thereby, the short-run IPO underpricing did not occur in the Japanese market and it is inferred that offer prices of IPOs in the Japanese market are priced rationally, reflecting all available pieces of information at the time of offering. The implication of this finding for Efficient Market Hypothesis is that in the short-run, market efficiency holds well for the Japanese market. Findings from the examination on short-run performance of IPO stocks in the Japanese market has enabled this study to answer the research question: Does short-run IPO underpricing exist at stock exchange markets in Japan? The answer is, the short-run IPO underpricing did not exist.

Suggested Citation

  • Yoshiki Shimizu & Hideki Takei, 2018. "Exploring the Existence of Short-run Initial Public Offering (IPO) Underpricing at Three Different Stock Exchange Markets in Japan," Business and Economic Research, Macrothink Institute, vol. 8(1), pages 253-266, March.
    • Handle: RePEc:mth:ber888:v:8:y:2018:i:1:p:253-266
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    References listed on IDEAS

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    1. Beatty, Randolph P. & Ritter, Jay R., 1986. "Investment banking, reputation, and the underpricing of initial public offerings," Journal of Financial Economics, Elsevier, vol. 15(1-2), pages 213-232.
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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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