IDEAS home Printed from https://ideas.repec.org/a/bla/finrev/v40y2005i4p497-518.html
   My bibliography  Save this article

Marketing Closed‐End Fund IPOs: An Analysis of the International Stock Funds

Author

Listed:
  • David C. Leonard
  • Terry D. Nixon
  • David M. Shull

Abstract

Various studies argue that underwriting fees are excessive and investment bankers prolong the price stabilization period in aftermarket trading of closed‐end fund (CEF) shares. The poor performance of these funds also raises questions about the financial sophistication of initial public offering (IPO) buyers. In this study, we examine these issues for a sample of international stock CEFs. Our findings indicate that underwriting fees are not excessive relative to industrial issues, and we do not find that investment bankers prolong the stabilization period to camouflage the underwriting cost. Our findings are consistent with earlier studies that discounts contribute significantly to the poor performance during the first six months of aftermarket trading.

Suggested Citation

  • David C. Leonard & Terry D. Nixon & David M. Shull, 2005. "Marketing Closed‐End Fund IPOs: An Analysis of the International Stock Funds," The Financial Review, Eastern Finance Association, vol. 40(4), pages 497-518, November.
    • Handle: RePEc:bla:finrev:v:40:y:2005:i:4:p:497-518
    DOI: 10.1111/j.1540-6288.2005.00121.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1540-6288.2005.00121.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1540-6288.2005.00121.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Hsuan‐Chi Chen & Jay R. Ritter, 2000. "The Seven Percent Solution," Journal of Finance, American Finance Association, vol. 55(3), pages 1105-1131, June.
    2. Sias, Richard W, 1997. "Price Pressure and the Role of Institutional Investors in Closed-End Funds," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 20(2), pages 211-229, Summer.
    3. Gikas Hardouvelis & Rafael La Porta & Thierry A. Wizman, 1994. "What Moves the Discount on Country Equity Funds?," NBER Chapters, in: The Internationalization of Equity Markets, pages 345-403, National Bureau of Economic Research, Inc.
    4. Gruber, Martin J, 1996. "Another Puzzle: The Growth in Activity Managed Mutual Funds," Journal of Finance, American Finance Association, vol. 51(3), pages 783-810, July.
    5. Lee, Charles M C & Shleifer, Andrei & Thaler, Richard H, 1991. "Investor Sentiment and the Closed-End Fund Puzzle," Journal of Finance, American Finance Association, vol. 46(1), pages 75-109, March.
    6. Robert Ferguson & Dean Leistikow, 2004. "Closed‐End Fund Discounts and Expected Investment Performance," The Financial Review, Eastern Finance Association, vol. 39(2), pages 179-202, May.
    7. Richard W. Sias, 1997. "Price Pressure And The Role Of Institutional Investors In Closed-End Funds," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 20(2), pages 211-229, June.
    8. Handley, Kathleen Weiss & Lee, Charles M. C. & Seguin, Paul L., 1996. "The Marketing of Closed-end Fund IPOs: Evidence from Transactions Data," Journal of Financial Intermediation, Elsevier, vol. 5(2), pages 127-159, April.
    9. Reena Aggarwal, 2000. "Stabilization Activities by Underwriters after Initial Public Offerings," Journal of Finance, American Finance Association, vol. 55(3), pages 1075-1103, June.
    10. Peavy, John W, III, 1990. "Returns on Initial Public Offerings of Closed-End Funds," The Review of Financial Studies, Society for Financial Studies, vol. 3(4), pages 695-708.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kenneth A. Froot & Tarun Ramadorai, 2001. "The Information Content of International Portfolio Flows," NBER Working Papers 8472, National Bureau of Economic Research, Inc.
    2. Severn, Alan K., 1998. "Closed-end funds and sentiment risk," Review of Financial Economics, Elsevier, vol. 7(1), pages 103-119.
    3. Kräussl, Roman & Pollet, Joshua M. & Stefanova, Denitsa, 2023. "Closed-end funds and discount control mechanisms," CFS Working Paper Series 707, Center for Financial Studies (CFS).
    4. Neal, Robert & Wheatley, Simon M., 1998. "Adverse selection and bid-ask spreads: Evidence from closed-end funds," Journal of Financial Markets, Elsevier, vol. 1(1), pages 121-149, April.
    5. Alexander, Gordon J. & Peterson, Mark A., 2017. "Short selling and the pricing of closed-end funds," Journal of Financial Markets, Elsevier, vol. 33(C), pages 124-142.
    6. Emily J. Huang, 2015. "The role of institutional investors and individual investors in financial markets: Evidence from closed‐end funds," Review of Financial Economics, John Wiley & Sons, vol. 26(1), pages 1-11, September.
    7. Kim, Doseong & Kim, Yura & Song, Kyojik Roy, 2013. "Payout policies on U.S. closed-end funds," International Review of Economics & Finance, Elsevier, vol. 27(C), pages 345-356.
    8. Matthew Spiegel, 1998. "Closed-End Fund Discounts in a Rational Agent Economy," Yale School of Management Working Papers ysm80, Yale School of Management, revised 01 Aug 2000.
    9. Alan K. Severn, 1998. "Closed‐end funds and sentiment risk," Review of Financial Economics, John Wiley & Sons, vol. 7(1), pages 103-119.
    10. Huang, Emily J., 2015. "The role of institutional investors and individual investors in financial markets: Evidence from closed-end funds," Review of Financial Economics, Elsevier, vol. 26(C), pages 1-11.
    11. Cui, Yueting & Gebka, Bartosz & Kallinterakis, Vasileios, 2019. "Do closed-end fund investors herd?," Journal of Banking & Finance, Elsevier, vol. 105(C), pages 194-206.
    12. Kräussl, Roman & Pollet, Joshua & Stefanova, Denitsa, 2018. "Signaling or marketing? The role of discount control mechanisms in closed-end funds," CFS Working Paper Series 597, Center for Financial Studies (CFS).
    13. Robert Ferguson & Dean Leistikow, 2004. "Closed‐End Fund Discounts and Expected Investment Performance," The Financial Review, Eastern Finance Association, vol. 39(2), pages 179-202, May.
    14. Stylianos X. Koufadakis, 2016. "Mispricing Explanations of Closed-End Funds: A Survey Review," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 66(1-2), pages 108-135, January-J.
    15. Jonathan Berk & Richard Stanton, 2004. "A Rational Model of the Closed-End Fund Discount," NBER Working Papers 10412, National Bureau of Economic Research, Inc.
    16. Davies, Richard & Fletcher, Mary & Marshall, Andrew, 2013. "Investigating the role of illiquidity in explaining the UK closed-end country fund discount," International Review of Financial Analysis, Elsevier, vol. 30(C), pages 121-130.
    17. Frankel, Jeffrey A & Schmukler, Sergio L, 2000. "Country Funds and Asymmetric Information," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 5(3), pages 177-195, July.
    18. Franzke, Stefanie A. & Schlag, Christian, 2003. "Over-allotment options in IPOs on Germany's Neuer Markt: An empirical investigation," CFS Working Paper Series 2002/16, Center for Financial Studies (CFS).
    19. Alexander S. Sangare, 2005. "Efficience des marchés : un siècle après Bachelier," Revue d'Économie Financière, Programme National Persée, vol. 81(4), pages 107-132.
    20. Delcoure, Natalya & Zhong, Maosen, 2007. "On the premiums of iShares," Journal of Empirical Finance, Elsevier, vol. 14(2), pages 168-195, March.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:finrev:v:40:y:2005:i:4:p:497-518. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/efaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.