Narrow Results

Effective information disclosure is the cornerstone of sustainable operation of the capital market. In the IPO market, whether public information in the prospectus can be fully captured by investors largely depends on the quality of valuation-relevant information. Based on Chinese prospectuses, we create five unique indicators to measure the information quality and examine the relationship between information quality and IPO underpricing. We find that high quality of information disclosure results in less underpricing because they relieve serious information asymmetry between issuing companies and investors. We provide a new method to supervise and improve the quality of non-financial information disclosure.

Most Korean IPOs show significant initial underpricing which accounts for high initial returns. Our study explores the institutional and regulatory factors that have affected both the offering and after-market pricing mechanisms to test several hypotheses that might explain this underpricing in the Korean IPO market. We find a systematic difference in the initial stock price performance of new issues in an environment where firms have different motives for going public. We also find that in less regulated periods, the explanatory power of the variables relating to both the signaling and ex ante uncertainty hypotheses increase.

Korean and US IPO markets show significant initial underpricing, accounting for dramatic initial price increases. However, unlike its US counterpart, the Korean IPO market shows considerable market adjusted long-run returns. Hypotheses influenced by Korean institutional and regulatory factors, tested to explain the IPO cumulative returns, suggest that some of the theoretical arguments and empirical regularities observed in the US IPO market also apply to the Korean IPO market. However, this is a function of the regulatory environment in the four periods investigated in this study.

The main purpose of this paper is to study the empirical determinants of the underpricing of H-share initial public offerings (IPOs) during the 1993–2003 period. A special characteristic of H-shares is that they are shares of companies incorporated in China, but are also listed abroad. Our estimates indicate that the average IPO underpricing level of H-shares was about 16.8%. We find that the conventional explanations for the worldwide IPO underpricing are not adequate in explaining the underpricing level of H-shares. Some new factors that are important in explaining the underpricing phenomenon in H-shares are identified. We show that the degree of IPO underpricing is positively associated with market conditions prior to issuance. It is also negatively related to the range of the issuing prices as well as to the growth rate of historical profits. In addition, it is found that firms cross-listed in Hong Kong and America have higher underpricing levels.

Most Initial Public Offerings (IPOs) feature share lockup agreements, which prohibit insiders and other pre-IPO shareholders from selling their shares for a specified period of time following IPO. We explore possible reasons why some IPO firms voluntarily agree to have a much longer lockup period than other firms. We find evidence that lockup agreements are used to control agency costs. Longer lockups are significantly related to inferior long-run returns and this relationship is stronger for firms that have less reputable underwriters. We find no evidence that lockup agreements are used to signal firm quality and we are unable to relate firm quality, as measured by long-run returns, to information asymmetry variables.

In this paper, we examine how analysts react to IPO percentage offering size. We find that analysts predict lower long-term earnings growth rates for IPOs with larger percentage offering size. The sizes of both primary and secondary offering are negatively related to long-term growth rate forecasts. We find evidence that the free cash flow effect may be related to the negative relation between primary offering size and growth forecast.

The aim of this study is to investigate whether the adoption of convergent-International Financial Reporting Standards (IFRS) in China affects the audit fees of initial public offerings (IPO) firms. An empirical regression analysis using panel data for 1,094 nonfinancial IPOs (excluding season equity offers) of A-shares listed on the Shanghai and Shenzhen Stock Exchanges between 2003 and 2012 is adopted. The results reveal that audit fees increase following convergent-IFRS adoption in China and additionally suggest that convergent-IFRS adoption eases the intense price competition that previously existed in China’s audit market and thus has important policy implications for regulators. To the best of the authors’ knowledge, this study represents the first reported attempt to adopt the IPO setting to examine the effects of convergent-IFRS adoption on audit fees and fills the gap in literature. Using a setting of IPOs enables this paper to further exclude the influence of quasi-rents derived from low-balling after initial audit engagement when testing audit fees.