Performance of initial public offerings in the short-run

Abstract

Previous studies have indicated that Initial Public Offerings are underpriced on average. The offer prices of the shares are, on average, set below the prices investors are willing to pay when the stock starts trading. Issuing firms, therefore, lose substantial money at the time of new issue. Multiple reasons have been suggested to explain this phenomenon, including, investment banks’ monopoly after Glass Steagall Act; regulatory structures; information asymmetry; managerial conflicts; and behavioral explanations. This thesis focuses on information asymmetry and sector dynamics of offerings, that could explain IPO underpricing in five global markets between 2005 and 2015. I have analyzed 2,731 deals across US, UK, Japan, Singapore, & Hong Kong, and found out that IPO underpricing existed in all countries. Oversubscription of IPOs, total IPO proceeds in the offering, period of issue, and Stock markets performance were found to be the influencing factors in IPO underpricing.