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The short-run price performance of initial public offerings in Hong Kong: New evidence

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  • Vong, Anna P.I.
  • Trigueiros, Duarte

Abstract

The study examines the first day returns of over 480 initial public offerings (IPO) in Hong Kong during a 12-year period (1994-2005). Based on this set of observations the study builds a comprehensive model of the short-term price performance of new offerings, in the light of the existing theoretical hypotheses about IPO underpricing. Results show clear evidence of the signaling effect of underwriters' reputation. For a set of different conditions and time periods examined, the most sought after underwriters are consistently associated with less underpriced offerings. In addition, the study shows that offerings underwritten by two or more underwriters tend to be less underpriced and that underpricing may be a signal in its own right. The study also shows that the informed demand hypothesis of Rock (1986) is supported only where some specific circumstances are verified. Finally, results confirm the recent trend (in Hong Kong) towards a less aggressive underpricing.

Suggested Citation

  • Vong, Anna P.I. & Trigueiros, Duarte, 2010. "The short-run price performance of initial public offerings in Hong Kong: New evidence," Global Finance Journal, Elsevier, vol. 21(3), pages 253-261.
    • Handle: RePEc:eee:glofin:v:21:y:2010:i:3:p:253-261
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    References listed on IDEAS

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    Cited by:

    1. Mazumder, Sharif & Saha, Pritam, 2021. "COVID-19: Fear of pandemic and short-term IPO performance," Finance Research Letters, Elsevier, vol. 43(C).
    2. Congsheng Wu, 2014. "Underpricing of homecoming A-share IPOs by Chinese firms already listed abroad," Review of Quantitative Finance and Accounting, Springer, vol. 43(3), pages 627-649, October.
    3. Anna P. I. Vong & Duarte Trigueiros, 2017. "Evidence on the effect of ‘Claw-Back’ provisions on IPO share allocation and underpricing in Hong Kong," Applied Economics, Taylor & Francis Journals, vol. 49(51), pages 5231-5244, November.
    4. Paul B. McGuinness, 2012. "The role of ‘cornerstone’ investors and the Chinese state in the relative underpricing of state- and privately controlled IPO firms," Applied Financial Economics, Taylor & Francis Journals, vol. 22(18), pages 1529-1551, September.
    5. Zhao, Yi & Wang, Nan & Zhang, Luyang & Sun, Baiqing & Yang, Yuchen, 2022. "The greater the investor attention, the better the post-IPO performance? A view of pre-IPO and post-IPO investor attention," Research in International Business and Finance, Elsevier, vol. 63(C).
    6. Nibu Raj Abraham, 2015. "Underpricing in the Malaysian IPO Market During 2009-2014," Journal of Applied Management and Investments, Department of Business Administration and Corporate Security, International Humanitarian University, vol. 4(4), pages 194-200, November.
    7. Tiziana La Rocca, 2021. "Do prestigious underwriters shape IPO pricing? A meta-analytic review," Review of Managerial Science, Springer, vol. 15(3), pages 573-609, April.
    8. Reddy, K. Srinivasa, 2011. "The aftermarket pricing performance of initial public offers: Insights from India," MPRA Paper 62885, University Library of Munich, Germany, revised 2013.

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