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The Effect of the Trading System on the Underpricing of Initial Public Offerings

Author

Listed:
  • John Affleck-Graves
  • Shantaram P. Hegde
  • Robert E. Miller
  • Frank K. Reilly

Abstract

Several studies have documented significant average underpricing for initial public offerings (IPOs) of common stock on the NASDAQ system - that is, the closing price on the first day of trading is significantly higher on average than the offer price. In our paper, we examine whether IPOs on the exchanges (NYSE and AMEX) display similar underpricing. In addition, we test whether differences in the initial and continued listing standards imposed by the exchanges and NASDAQ impact the level of underpricing of IPOs.

Suggested Citation

  • John Affleck-Graves & Shantaram P. Hegde & Robert E. Miller & Frank K. Reilly, 1993. "The Effect of the Trading System on the Underpricing of Initial Public Offerings," Financial Management, Financial Management Association, vol. 22(1), Spring.
    • Handle: RePEc:fma:fmanag:affleck93
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    Citations

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    Cited by:

    1. Hafiz Hoque & John Doukas, 2024. "Endogenous market choice, listing regulations, and IPO spread: Evidence from the London Stock Exchange," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(2), pages 2360-2380, April.
    2. Fouad Jamaani & Manal Alidarous, 2019. "Review of Theoretical Explanations of IPO Underpricing," Journal of Accounting, Business and Finance Research, Scientific Publishing Institute, vol. 6(1), pages 1-18.
    3. Mar, Pamela & Young, Michael N., 2001. "Corporate governance in transition economies: a case study of two Chinese airlines," Journal of World Business, Elsevier, vol. 36(3), pages 280-302, October.
    4. Bulent Aybar, C., 2002. "The long-term performance of privatization-related ADR issues," Emerging Markets Review, Elsevier, vol. 3(2), pages 135-164, June.
    5. Iftekhar Hasan & Maya Waisman, 2012. "Foreign IPOs: The Experience of Israeli Firms," Chapters, in: Kern Alexander & Rahul Dhumale (ed.), Research Handbook on International Financial Regulation, chapter 17, Edward Elgar Publishing.
    6. Dev Prasad & George S. Vozikis & Garry D. Bruton & Andreas Merikas, 1996. "“Harvesting†through Initial Public Offerings (IPOs): The Implications of Underpricing for the Small Firm," Entrepreneurship Theory and Practice, , vol. 20(2), pages 31-41, January.
    7. Catherine M. Daily & S. Trevis Certo & Dan R. Dalton & Rungpen Roengpitya, 2003. "IPO Underpricing: A Meta–Analysis and Research Synthesis," Entrepreneurship Theory and Practice, , vol. 27(3), pages 271-295, July.
    8. Paula Hill, 2006. "Ownership Structure and IPO Underpricing," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(1‐2), pages 102-126, January.
    9. Doukas, John A. & Hoque, Hafiz, 2016. "Why firms favour the AIM when they can list on main market?," Journal of International Money and Finance, Elsevier, vol. 60(C), pages 378-404.

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