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Determinants of the initial IPO performance: evidence from Hong Kong and Taiwan

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  • Chien-Ting Lin
  • Shou-Ming Hsu

Abstract

The study examines the pricing determinants of initial public offerings (IPOs) in the Hong Kong and Taiwanese markets. Consistent with the literature, we find that the IPOs are underpriced in these two markets. Among the pricing determinants we examine, share allotment over the number of participating applicants appears to be the most important common factor. However, different IPO market characteristics do exist between the markets. We document that investment firms are underpriced while the trading and service firms are overpriced during the IPO events in Hong Kong. In contrast, liquidity appears to be positively related to the initial underpricing of IPO firms in Taiwan. Our evidence therefore supports the winner's curse model proposed by Rock (1986), and to some extent the liquidity theory by Booth and Chua (1996). The applicability and implications of our findings should also be of value to firms seeking external equities in these markets.

Suggested Citation

  • Chien-Ting Lin & Shou-Ming Hsu, 2008. "Determinants of the initial IPO performance: evidence from Hong Kong and Taiwan," Applied Financial Economics, Taylor & Francis Journals, vol. 18(12), pages 955-963.
    • Handle: RePEc:taf:apfiec:v:18:y:2008:i:12:p:955-963
    DOI: 10.1080/09603100701367393
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    Cited by:

    1. Bhattacharya, Arnab, 2017. "Innovations in new venture financing: Evidence from Indian SME IPOs," Global Finance Journal, Elsevier, vol. 34(C), pages 72-88.
    2. Robert Brooks & Tim Fry & William Dimovski & Sandra Mihajilo, 2009. "A duration analysis of the time from prospectus to listing for Australian initial public offerings," Applied Financial Economics, Taylor & Francis Journals, vol. 19(3), pages 183-190.
    3. 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.
    4. Nischay Arora & Balwinder Singh, 2023. "Do Female Directors Signal Indian SME IPOs Quality? Evidence From a Quantile Regression Approach," Global Business Review, International Management Institute, vol. 24(1), pages 185-205, February.
    5. Sanjay Dhamija & Ravinder Kumar Arora, 2017. "Initial and After-market Performance of SME IPOs in India," Global Business Review, International Management Institute, vol. 18(6), pages 1536-1551, December.
    6. Yacine Belghitar & Rob Dixon, 2012. "Do venture capitalists reduce underpricing and underperformance of IPOs?," Applied Financial Economics, Taylor & Francis Journals, vol. 22(1), pages 33-44, January.
    7. Sanjay Sehgal & Bhushan Kumar Sinha, 2013. "Valuation of IPOs in India-An Empirical study," Business and Economic Research, Macrothink Institute, vol. 3(2), pages 183-204, December.

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