Signaling by Underpricing the Initial Public Offerings of Primary Listings in an Emerging Market
Journal Title: Finance a uver - Year 2015, Vol 65, Issue 4
Abstract
We show that issuers use initial public offering (IPO) underpricing to signal their quality when the a priori information asymmetry is significant. Contrary to weak evidence in the signaling hypothesis from established markets, we find that in a less transparent emerging market firms strategically underprice their IPOs to issue seasoned equity at better terms. Private firms that underpriced their primary listing in Poland between 2005 and 2009 were more likely to make follow-up seasoned equity offerings (SEOs) and their SEOs were larger and occurred sooner after the IPOs. This suggests that the economic incentives to follow the signaling strategy are stronger in opaque environments where high-quality issuers may underprice IPOs to overcome information asymmetry.
Authors and Affiliations
Ales Cornanic, Jiri Novak
Keywords
Related Articles
- EP ID EP297522
- DOI -
- Views 145
- Downloads 0
Editorial to the Special Issue on Emerging Market Finance and Institutional Investors
---
Fiscal Councils and Economic Volatility
We evaluate proposals for an independent fiscal authority put forward as a solution to excessive public spending. Our main conclusion is that shifting the responsibility to set broad measures of fiscal policy from the ha...
Effects of Macroprudential Policy on Systemic Risk and Bank Risk Taking
Using an international sample of 95 banks from 21 European and North American countries spanning from 2008 to 2014, this paper assesses the effectiveness of a large set of general and housing macro-prudential policies in...
Optimal Fiscal Policy in the Presence of VAT Evasion: The Case of Bulgaria
This paper explores the effects of fiscal policy in the presence of a VAT evasion channel, and then compares and contrasts two regimes - the exogenous vs. optimal policy case. To this end, a dynamic general-equilibrium m...
The Impact of Institutional Quality on Bank Lending Activity: Evidence from Bayesian Model Averaging
The paper investigates the link between macroeconomic shocks, the institutional environment and the responses of bank lending activities to the financial crisis. We hypothesize that property rights and the enforcement of...