IDEAS home Printed from https://ideas.repec.org/a/taf/apfiec/v9y1999i5p491-499.html
   My bibliography  Save this article

The effects of offering method and trading location on the pricing of IPOs in Singapore

Author

Listed:
  • Ruth Seow Kuan Tan
  • Li Li Eng
  • Andrew Khoo

Abstract

In this study, we look at the effects of using different offering methods and examine whether the auction system is a better way of rationing IPOs in the sense of reducing the degree of underpricing. Preliminary findings show that IPOs offered via the auction system appear to have lower underpricing. However this is not confirmed by cross-sectional regression analysis. Results show that only the subscription rate is significantly associated with the degree of underpricing. The other variables such as the market of listing, the price earnings ratio at time of issue and the first day relative volume are not significantly related to the underpricing. The second part of the study compares fixed price initial public offerings (IPOs) listed on the Stock Exchange of Singapore Dealing and Automated Quotation System (SESDAQ), the second tier stock market in Singapore, with fixed price IPOs listed on the Main Board. The PE ratios at time of issue and subscription rates of SESDAQ IPOs are significantly lower than Main Board IPOs. Their initial market-adjusted returns are also lower but not significantly so. In the post-listing period, a different picture is seen. SESDAQ issues have significantly higher returns than Main Board IPOs.

Suggested Citation

  • Ruth Seow Kuan Tan & Li Li Eng & Andrew Khoo, 1999. "The effects of offering method and trading location on the pricing of IPOs in Singapore," Applied Financial Economics, Taylor & Francis Journals, vol. 9(5), pages 491-499.
    • Handle: RePEc:taf:apfiec:v:9:y:1999:i:5:p:491-499
    DOI: 10.1080/096031099332159
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/096031099332159
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/096031099332159?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
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Ritter, Jay R, 1991. "The Long-run Performance of Initial Public Offerings," Journal of Finance, American Finance Association, vol. 46(1), pages 3-27, March.
    2. repec:bla:jfinan:v:44:y:1989:i:1:p:135-48 is not listed on IDEAS
    3. Fama, Eugene F & French, Kenneth R, 1992. "The Cross-Section of Expected Stock Returns," Journal of Finance, American Finance Association, vol. 47(2), pages 427-465, June.
    4. Lakonishok, Josef & Shleifer, Andrei & Vishny, Robert W, 1994. "Contrarian Investment, Extrapolation, and Risk," Journal of Finance, American Finance Association, vol. 49(5), pages 1541-1578, December.
    5. Ball, Ray, 1978. "Anomalies in relationships between securities' yields and yield-surrogates," Journal of Financial Economics, Elsevier, vol. 6(2-3), pages 103-126.
    6. Chan, Louis K C & Hamao, Yasushi & Lakonishok, Josef, 1991. "Fundamentals and Stock Returns in Japan," Journal of Finance, American Finance Association, vol. 46(5), pages 1739-1764, December.
    7. Rock, Kevin, 1986. "Why new issues are underpriced," Journal of Financial Economics, Elsevier, vol. 15(1-2), pages 187-212.
    8. Koh, Francis & Walter, Terry, 1989. "A direct test of Rock's model of the pricing of unseasoned issues," Journal of Financial Economics, Elsevier, vol. 23(2), pages 251-272, August.
    9. Ritter, Jay R, 1984. "The "Hot Issue" Market of 1980," The Journal of Business, University of Chicago Press, vol. 57(2), pages 215-240, April.
    10. Basu, Sanjoy, 1983. "The relationship between earnings' yield, market value and return for NYSE common stocks : Further evidence," Journal of Financial Economics, Elsevier, vol. 12(1), pages 129-156, June.
    11. Wong, Kie Ann & Lye, Meng Siong, 1990. "Market values, earnings' yields and stock returns : Evidence from Singapore," Journal of Banking & Finance, Elsevier, vol. 14(2-3), pages 311-326, August.
    12. Saunders, Anthony & Lim, Joseph, 1990. "Underpricing and the new issue process in Singapore," Journal of Banking & Finance, Elsevier, vol. 14(2-3), pages 291-309, August.
    13. William Vickrey, 1961. "Counterspeculation, Auctions, And Competitive Sealed Tenders," Journal of Finance, American Finance Association, vol. 16(1), pages 8-37, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Beat Reber & Caroline Fong, 2006. "Explaining mispricing of initial public offerings in Singapore," Applied Financial Economics, Taylor & Francis Journals, vol. 16(18), pages 1339-1353.
    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. Chen, An-Sing & Liaw, Gwohorng & Leung, Mark T., 2003. "Stock auction bidding behavior and information asymmetries: An empirical analysis using the discriminatory auction model framework," Journal of Banking & Finance, Elsevier, vol. 27(5), pages 867-889, May.
    4. Anna Vong, 2006. "Rate of subscription and after-market volatility in Hong Kong IPOs," Applied Financial Economics, Taylor & Francis Journals, vol. 16(16), pages 1217-1224.
    5. Gili Yen & Ching-Lung Chen, 2009. "Partial auction, pricing information and price adjustment in the IPO's aftermarket: an empirical study of TAIEX-listing firms," Applied Financial Economics, Taylor & Francis Journals, vol. 19(8), pages 669-680.
    6. Anna Vong & Duarte Trigueiros, 2009. "An empirical extension of Rock's IPO underpricing model to three distinct groups of investors," Applied Financial Economics, Taylor & Francis Journals, vol. 19(15), pages 1257-1268.

    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. Gabriel Hawawini & Donald B. Keim, "undated". "The Cross Section of Common Stock Returns: A Review of the Evidence and Some New Findings," Rodney L. White Center for Financial Research Working Papers 08-99, Wharton School Rodney L. White Center for Financial Research.
    2. Eero Pätäri & Timo Leivo, 2017. "A Closer Look At Value Premium: Literature Review And Synthesis," Journal of Economic Surveys, Wiley Blackwell, vol. 31(1), pages 79-168, February.
    3. Chan, Kalok & Wang, Junbo & Wei, K. C. John, 2004. "Underpricing and long-term performance of IPOs in China," Journal of Corporate Finance, Elsevier, vol. 10(3), pages 409-430, June.
    4. Tang, Gordon Y. N. & Shum, Wai Cheong, 2004. "The risk-return relations in the Singapore stock market," Pacific-Basin Finance Journal, Elsevier, vol. 12(2), pages 179-195, April.
    5. David Hirshleifer, 2001. "Investor Psychology and Asset Pricing," Journal of Finance, American Finance Association, vol. 56(4), pages 1533-1597, August.
    6. Keith Anderson & Chris Brooks, 2005. "The Long-Term P/E Radio," ICMA Centre Discussion Papers in Finance icma-dp2005-02, Henley Business School, University of Reading.
    7. repec:bla:jfinan:v:58:y:2003:i:5:p:1969-1996 is not listed on IDEAS
    8. Fernando Rubio, 2005. "Eficiencia De Mercado, Administracion De Carteras De Fondos Y Behavioural Finance," Finance 0503028, University Library of Munich, Germany, revised 23 Jul 2005.
    9. Malcolm Baker & Jeffrey Wurgler, 2006. "Investor Sentiment and the Cross‐Section of Stock Returns," Journal of Finance, American Finance Association, vol. 61(4), pages 1645-1680, August.
    10. Wolfgang Aussenegg & Andreas Grünbichler, 1999. "Der Size-Effekt am Österreichischen Aktienmarkt," Schmalenbach Journal of Business Research, Springer, vol. 51(7), pages 636-661, July.
    11. John Y. Campbell & Tuomo Vuolteenaho, 2004. "Bad Beta, Good Beta," American Economic Review, American Economic Association, vol. 94(5), pages 1249-1275, December.
    12. D. L. Wilcox & T. J. Gebbie, 2013. "On pricing kernels, information and risk," Papers 1310.4067, arXiv.org, revised Oct 2013.
    13. Keith Lam & Frank Li, 2008. "The risk premiums of the four-factor asset pricing model in the Hong Kong stock market," Applied Financial Economics, Taylor & Francis Journals, vol. 18(20), pages 1667-1680.
    14. Kent Daniel & Sheridan Titman, 2006. "Market Reactions to Tangible and Intangible Information," Journal of Finance, American Finance Association, vol. 61(4), pages 1605-1643, August.
    15. Committee, Nobel Prize, 2013. "Understanding Asset Prices," Nobel Prize in Economics documents 2013-1, Nobel Prize Committee.
    16. David R Gallagher & Peter A Gardner & Camille H Schmidt, 2015. "Style factor timing: An application to the portfolio holdings of US fund managers," Australian Journal of Management, Australian School of Business, vol. 40(2), pages 318-350, May.
    17. Oehler, Andreas & Rummer, Marco & Smith, Peter N., 2004. "IPO Pricing and the Relative Importance of Investor Sentiment: Evidence from Germany," Discussion Papers 26, University of Bamberg, Chair of Finance.
    18. Schwert, G. William, 2003. "Anomalies and market efficiency," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 15, pages 939-974, Elsevier.
    19. Dewandaru, Ginanjar & Masih, Rumi & Bacha, Obiyathulla Ismath & Masih, A. Mansur. M., 2015. "Combining momentum, value, and quality for the Islamic equity portfolio: Multi-style rotation strategies using augmented Black Litterman factor model," Pacific-Basin Finance Journal, Elsevier, vol. 34(C), pages 205-232.
    20. Ball, Ray & Gerakos, Joseph & Linnainmaa, Juhani T. & Nikolaev, Valeri, 2020. "Earnings, retained earnings, and book-to-market in the cross section of expected returns," Journal of Financial Economics, Elsevier, vol. 135(1), pages 231-254.
    21. Ronald Best & Charles Hodges & James Yoder, 2006. "Expected earnings growth and portfolio performance," Review of Quantitative Finance and Accounting, Springer, vol. 26(4), pages 431-437, June.

    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:taf:apfiec:v:9:y:1999:i:5:p:491-499. 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: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAFE20 .

    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.