Initial performance of Greek IPOs, underwriter's reputation and oversubscription

Abstract

Purpose -This paper aims to provide additional international evidence on the initial public offerings (IPOs) by examining the initial performance and two main determinants of short-run underpricing of 169 IPOs listed on the Athens Stock Exchange (ASE) over the period 1997-2002. Design/methodology/approach -In the first stage, the initial performance of the IPOs is measured by two calculated formulas: the raw returns and the excess or adjusted returns of the first, fifth and 21st day, respectively. In the second stage, a proxy is used to rank the underwriters' prestige along with the times of oversubscription, which are introduced as explanatory variables in the model. Findings -The results of the analysis on the initial performance of the IPOs provide evidence of significant underpricing. Furthermore, the cross-sectional analysis on the determinants of the IPOs shows that both the underwriters' prestige and the times of oversubscription significantly affect the underpricing level of the IPOs. Research limitations/implications -To understand the Greek IPO market with further depth, future studies could shed light on the other hypotheses emerging from the finance literature to explain the underpricing phenomenon. Practical implications -This paper helps investors and issuers to understand the role of an underwriter's reputation into the Greek going public process and the underpricing phenomenon and supports that the oversubscription is a pure signal to the investors that the shares are underpriced. Originality/value -This paper presents further evidence on the underpricing of the Greek IPOs, while extending previous relative studies by providing an explanation of this phenomenon over the most important and ''hot'' period for the Greek emerging stock market since its establishment, in terms of growth rates, acceleration of the going public process and volatility of market and stock returns.

Factors from Underwriter That Influence Initial Return of The Companies Doing Initial Public Offerings in Indonesia Stock Exchange in The Period Of 2004-2011

“…Variables are taken differently, so they shows the different results. Guner (2000) and Jones (2010) state that the underwriter factors are negative significant on initial return, supported by two other studies of Kenourgios (2007) and Sharma (2010) with prestige variable, and also by Fung (2008) that states that the underwriter ranking effects negatively. However, two other studies found that underwriter factors have no significant effect on initial return, proposed by Almeida (2011) and Su (2011).…”

“…Aggarwal and Rivoli (1990) and Ritter (1991) in Durukan (2002) suggest that abnormal initial return is not because of systematic underpricing, but it is because of overvaluation by investors or the mode in the early aftermarket trading. Kenourgios (2007) also adds some points in the hypotheses that affect IPO underpricing, they are: 1. Monopsony power of underwriters hypothesis.…”

“…According to Klein (2001) underwriter is usually compensated by a commission which is a fixed percentage of the capital raised to minimize underpricing, so the capital raised reflects the compensation paid to the underwriters and may also reflect the underwriter"s prestige (Ardiansyah, 2004). According to Kenourgios (2007), underwriter prestige can be a proxy using the ratio of capital which has been enhanced through the IPO process, so prestige can be measured by using the capital raised (CR) with this formula:…”

IPOs Performance Analysis: Evidence from Emerging Markets in the Balkans

“…Following the same principle and the formulae for the raw returns on stocks, the same methodology was utilized for the raw returns on the Market Index, as follows: (2) As Kenourgios et al (2007), Hensler et al (2000) data were adjusted for a possible change in market conditions causing an impact on the changes in the price. The estimation of excess of returns is calculated using the formula (3) which is calculated by subtracting the Market Index of the raw returns on stocks and the raw returns.…”

An examination of short-run performance of IPOs using Extreme Bounds Analysis

“…Earlier research found that the underwriter's reputation affects the underpricing level (Kenourgios et al, 2007). Table 5 examines the underwriter's prestige and average underpricing.…”