Endogenous Entry and Partial Adjustment in IPO Auctions: Are Institutional Investors Better Informed?

Chiang, Yao‐Min; Qian, Yiming; Sherman, Ann E.

doi:10.2139/ssrn.990929

Cited by 12 publications

(19 citation statements)

References 47 publications

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“…Cook et al () examine the benefits of the marketing of US IPOs by underwriters and find that marketing is beneficial because it boosts retail investor sentiment. Furthermore, examining a sample of firms from Taiwan that went public using the auction method, Chiang et al () find that the number of individual bidders is positively correlated with firm size, the technology industry, and the underpricing of recent auction IPOs, and negatively correlated with market volatility during the three months prior to the auction day.…”

Section: Communication Restrictions and The Importance Of Retail Invementioning

confidence: 99%

Retail Investor Attention and IPO Valuation

Colaco

Cesari²,

Hegde

2017

Euro Fin Management

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Given restrictions placed on communication with prospective investors, retail investor attention can help firms/underwriters with the task of initially valuing an IPO. Using Google search volume to proxy for retail investor attention, we find that the presence of and an increase in retail attention following initial filing but prior to initial pricing are positively related to initial valuations. Our results are robust to alternative matching methods to identify our matched sample of non‐IPO firms and to including several controls for institutional demand. We conclude that retail investor attention plays a critical role in the early stages of IPO valuation.

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Section: Communication Restrictions and The Importance Of Retail Invementioning

confidence: 99%

Retail Investor Attention and IPO Valuation

Colaco

Cesari²,

Hegde

2017

Euro Fin Management

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“…As bidding price represents investors’ willingness to pay, informed investors’ high bidding price indicates that the firm has a high value. In an IPO auction setting (Sherman, ; Chiang et al ., ), institutional investors’ higher bidding prices can signal a positive valuation for IPO firms based on their private information.…”

Section: Introductionmentioning

confidence: 99%

“…The ex‐ante effects of institutional investors’ oversubscription during bookbuilding are unclear. On the one hand, like informed investors entering an IPO auction (Sherman, ; Chiang et al ., ), institutional investors’ oversubscription can signal a positive valuation for IPO firms based on their private information . Institutional investors place bids only when they expect to receive returns from their subscription, given their expectation of the finalized offer price.…”

Section: Introductionmentioning

confidence: 99%

“… As underwriters set the offer price, Korean “bookbuilding” differs from the multi‐price auction system in Taiwan, in which subscribers pay their bidding prices (Chiang et al ., ). In addition, the number of shares allocated to institutional investors is proportional to the oversubscription ratio, which is also different from the Taiwanese auction system. …”

mentioning

confidence: 97%

“…() argue that this finding suggests that institutional investors bid less than their valuation of the firm ( shave bids ) in an IPO auction. However, unlike the Taiwanese auctions where the mean oversubscription ratio among institutional investors is only 0.76 (Chiang et al ., ), the average oversubscription ratio in Korea is over 106 times larger than the allocated shares in the data in this study.…”

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confidence: 99%

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Effects of Institutional Investors’ Bidding Information on Offer Prices and Initial Returns of IPOs

Joh

Kim²

2017

Asia-Pac J of Fin Stud

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Using hand‐collected data on all IPOs in Korea from 2001 to 2007 before the global financial crisis, we find that institutional investors’ favorable valuation increases the offer price and initial returns. In particular, when institutional investors’ weighted average bidding price (WAP) increases by 1%, the offer price increases by 0.81%. A higher WAP predicts higher initial returns. While oversubscription ratios yield positive effects on offer prices and predict higher initial returns, their effects are weaker when IPO market conditions or WAP are included in the regression equations. These results suggest that institutional investors’ bidding prices reflect their private valuations of firms more than their oversubscription ratios. In addition, for predicting initial returns, institutional investors’ bidding information outperforms the revised offer price.

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Bidding styles of institutional investors in IPO auctions

Güçbilmez

Briain²

2021

Journal of Financial Markets

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Endogenous Entry and Partial Adjustment in IPO Auctions: Are Institutional Investors Better Informed?

Cited by 12 publications

References 47 publications

Retail Investor Attention and IPO Valuation

Retail Investor Attention and IPO Valuation

Effects of Institutional Investors’ Bidding Information on Offer Prices and Initial Returns of IPOs

Bidding styles of institutional investors in IPO auctions

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