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IPO Underpricing Explanations: Implications from Investor Application and Allocation Schedules

Published online by Cambridge University Press:  06 April 2009

Philip J. Lee ,
Stephen L. Taylor  and
Terry S. Walter
Philip J. Lee
Affiliation:
Department of Accounting (H04), University of Sydney, NSW 2006, Australia.
Stephen L. Taylor
Affiliation:
Department of Accounting (H04), University of Sydney, NSW 2006, Australia.
Terry S. Walter
Affiliation:
Department of Accounting (H04), University of Sydney, NSW 2006, Australia.
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Abstract

Initial Public Offers (IPOs) made on the Stock Exchange of Singapore routinely provide sufficiently detailed data to allow reconstruction of both the application and allocation schedules. We show that large investors tend to preferentially request participation in IPOs with higher initial returns, consistent with these investors being better informed. We also show that inferences based exclusively on application strategies are quite different from those drawn on investor allocations. Our results suggest that caution is necessary in assessing the relative merit of competing explanations for IPO underpricing where the underlying demand is not identified.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 34 , Issue 4 , December 1999 , pp. 425 - 444
Copyright
Copyright © School of Business Administration, University of Washington 1999

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