IPOs: The Third Year On

Purpose – The purpose of this paper is to model the Chinese unique regulation changes with the supply-and-demand analytical framework and structure the relationship between initial public offerings (IPO) underpricing and institutional changes with the comparative static method. A well-functioning stock market is crucial to the transition into a market economy, but the Chinese stock market is somehow twisted with frequent government interventions, particularly the IPO market. Can the underpricing issue be mitigated in the changing institutional settings? Can the market-orientated incremental reform of regulations succeed in the Chinese stock market? Design/methodology/approach – The theoretical analysis confirms that IPO underpricing becomes relatively better with dynamic changes of relaxation of the approval and pricing systems. Collecting and examining the data of newly listed firms from 1993 to 2010, the influence of institutional changes on IPO underpricing with regressions, such as ordinary least square (OLS), bootstrap and two stage least square (2SLS) estimation methods was further empirically examined. Findings – The magnitude of the Chinese IPO underpricing during the past two decades is as high as 181.6 per cent on the average. The sizes of IPO underpricing significantly reduce with an increase in the issuing sizes and the ratios of price-earnings ratios. The dummy variables of government-approved regulations are negatively associated with IPO underpricing. The dummy variables of pricing regulations are positively related to IPO underpricing and the coefficients become smaller with newer regulations. Generally, the magnitude of the Chinese IPO underpricing decreases over time. Originality/value – This paper enriches the IPO literature by dynamically examining the effect of institutional changes on IPO underpricing in Chinese primary markets. We argue that institutional changes characterized by incremental marketization can help to alleviate extreme IPO underpricing and to promote financial development. The Chinese transition from the planning system to the market system in the IPO market will be a long and strenuous process, but it works.

Bio venture companies establish a pipeline based on various studies related to the treatment and diagnosis of diseases and aim to commercialize products. Usually, it is understood that they strive for an initial public offering (IPO) with the primary purpose of raising capital for research and development (R&D). However, research on how IPO affects the R&D performance of bio venture companies is lacking. In this study, the R&D performance of bio venture companies in Korea was compared and analyzed for 2 years before and after IPO. Results show that patent applications did not change considerably during 2 years after IPO compared the number during 2 years before IPO in 24 bio venture companies listed from 2018 to 2021 in the Korean stock market. In addition, the cases of licensing in/out were not significantly changed in those companies for 2 years before and 2 years after IPO. The number of entering the next phase of clinical trials decreased substantially during the 2 years after IPO compared with the 2 years before IPO. Meanwhile, Korean bio venture companies were found to attract significant investment from financial investors (FIs) before the IPO, and the FIs recovered their investment immediately after the IPO. In the end, it seems that another main purpose of the IPO of Korean bio venture companies is to make an opportunity for the FIs to recover their investment rather than to secure funds for R&D investment. This study found that the IPO of Korean bio venture companies does not show the primary effects of IPO, such as effective financing of companies and provision of attractive investment opportunities to investors. These results provide sufficient evidence that new policies may be needed to address the possibility of the bio venture companies’ ill-timed IPO.

A Study of Underpricing, Ownership and Liquidity of Initial Public Offers (IPO) and their Impact on Performance of IPO Stocks in Indian Financial Markets

The study of IPO as a source of financial resources meets the current needs of the corporate sector in conditions of disintermediation and securitization trends of the financial market. In developed economies, there is a process of shifting the emphasis in the direction of capital attraction precisely on the stock market segment of the financial market, which has a number of advantages over the banking system that are also connected with the innovation and investment development of the national economy. The formation of the proper basis for the development of IPO market determines the timeliness of the consideration of this issue because it didn’t obtain a sufficient spread. The emergence of new instruments is the feature that characterizes the modern stage of the development of the Ukrainian and world economy. Their application is a condition for the further development and use of the potential opportunities for the improvement of economic systems. Enterprises are able to meet current market needs and challenges due to orientation to modern trends and timely reaction to the latest achievements. One of them is the IPO (initial public offering), which is the primary public offering of shares. Participants of the Ukrainian market face a number of obstacles during IPO on the domestic and foreign stock exchanges. It necessitates a comprehensive review of this issue for a further developing of this method of accumulating financial resources. The purpose of this article is to identify the IPO market as a system of interrelated components that form its essence, and on the basis of a generalization of the constraining factors of development – providing recommendations on the perspective lines of improving the IPO market, taking into consideration the peculiarities of the Ukrainian and world stock market. Methodology. Analytical market reviews, materials of periodicals, resources of the Internet are the informational and methodological basis of the investigation. To achieve the goal set, the following general scientific and special methods were used: economic and mathematical methods, structural-logical analysis, analogy, synthesis, comparison and integration, factor analysis. Results. The factors that should be taken into account by the issuer for the success of the IPO procedure are justified. Problematic aspects and directions of their elimination are determined for every concrete stage of the IPO. The model for the domestic companies to enter the IPO market is proposed that has a special significance in the context of increasing the volume of financing innovative activity. Directions for reforming the regulatory and legislative framework are considered. Practical implications. Directions for improving the process of passing through the IPO stages can be applied by issuers, taking into account the peculiarities of the domestic and world stock market. Value/originality. The biggest part of the scientific works is devoted to the theoretical aspects of IPO, clarifying the essence of this process, structuring its participants, the advantages of carrying out. At the same time, a part of the works is devoted to the consideration of IPO as an instrument for attracting financial resources by corporations. The authors reviewed IPO in a system that combines the above aspects with its procedure stages and propositions to cancel out constraining factors that have a place on each step of IPO. The presented integrated approach will allow expanding the use of the IPO in the financial market as a source of financial resources for the corporative sector. It is also important to consider the impact of the planned legislative reforms on the development of the IPO market in Ukraine. Taking into account all the components of the IPO market and existing features of the IPO within the framework of the national financial market and world stock exchanges will highlight directions of the IPO market spread.

From 1998 to 2001, the high-tech industry saw a dramatic increase and subsequent sharp decline in market capitalisation during a phenomenon known as the dot-com bubble. During this time there were a large number of private companies that made the decision to go public via an Initial Public Offering (IPO) of stock on the general equities market. After the dot-com crash of 2001, the IPO market for high-tech companies changed dramatically. Far fewer companies went public, and they had much lower first-day returns than those during the bubble. This paper explores the first-day returns of high-tech IPOs in the USA and Europe in the post-bubble era. We compare the results of the 2002?2005 post-bubble period with those of the 1998?2001 dot-com bubble period. We find that the high-tech IPO market was dramatically affected by the dot-com crash and that, after the crash, the number of high-tech IPOs dropped considerably, as did the average first-day returns of these IPOs. Finally, we find that the European high-tech IPO market was not as adversely affected by the dot-com crash as the American market.

Initial Public Offerings (IPOs) have long been considered a crucial step in a company'sgrowth trajectory. IPOs offer an opportunity for companies to raise capital and expand theirbusiness operations. However, the success of an IPO is not guaranteed, and several factorscan impact its performance in the stock market. This study seeks to explore the factors thatcan affect IPO performance from an analytical perspective. The economic conditionsprevailing at the time of an IPO can have a significant impact on its performance. Factorssuch as inflation, interest rates, and GDP growth can influence investor sentiment and, inturn, impact IPO performance. Similarly, industry-specific factors such as competition,technological changes, and regulatory changes can also impact IPO performance. Companyspecific factors such as financial performance, management quality, and growth potential canalso play a critical role in determining IPO success. Furthermore, the regulatory environmentsurrounding IPOs, including legal and compliance requirements, can affect investor sentimentand the success of an IPO. Through an analytical approach, this study aims to identify andanalyse the critical factors that can impact IPO performance in the stock market. The researchcan provide valuable insights into the underlying mechanisms driving IPO performance andcan be useful for investors, issuers, and policymakers in making informed decisions regardingIPO investments and regulations.

Introduction Although initial public offerings (IPOs) recently have attracted public and academic attention, the special case of firms founded by families or single entrepreneurs has not been investigated in depth. Given the lack of empirical research on family-controlled businesses (McConaughy et al. 2001), this study is an attempt to remedy this deficiency. For family-owned firms, a change in ownership structure by going public is a significant change in the governance of the corporation, because for the first time outside shareholders come into play. This pattern typically is to be observed for IPOs of family-owned firms in Germany. (1) Our paper merges two strands of research: on the one hand, the entrepreneurial literature on family-controlled businesses, and on the other hand, the vastly increasing research on corporate governance and IPOs. After reviewing some of the related literature, we present empirical evidence about (1) the change in corporate governance (as proxied by a change in the ownership structure) following IPOs; and (2) its impact on the long-run stock performance of family-owned firms in Germany. We conclude with a summary of the major findings. Related Literature Franks and Mayer (2001) report that family business shareholdings account for one-third of total shareholdings in Germany. They argue that family investors, since their wealth is tied directly to that of the family firm, seem to exert strong disciplining of poorly performing management. For the U.S., Kang (2000) and McConaughy et al. (2001) find that family controlled firms have greater value and are operated more efficiently than other firms. In a recent article, Bhattacharya and Ravikumar (2001) show that the development of efficient capital markets accelerates the evolution and the sale of family businesses. Thus, the public sale of family-owned firms and their resulting performance is a topic of growing importance. In Germany there were at least three factors that prohibited founding families from selling their firms during our investigation period. First, tax regulation made the sale of privately held equity stakes less attractive. Although the profit on the sale of exchange-traded shares is tax-exempt after a holding period of one year, selling stakes in nonquoted companies is taxed at high rates. Second, low competition in the underwriting market and thereby high direct costs of an IPO led to capital-raising firms preferring Hausbank-financed debt or private placements. Three, German ideas on family values and the corporate mission of family-owned firms also resulted in many owners rather not taking public their firms (Schurmann and Korfgen 1997). Goergen and Renneboog (2001) provide a comparative study on the evolution of ownership and control in German and U.K. IPOs. They found that initial shareholders (including families) lose majority control on average six years after the IPO in Germany. However, in two-thirds of their sample of 52 German IPOs, initial shareholders retain absolute majority control, and the probability of retaining control concentration augments when nonvoting shares are issued. Goergen (1998) studied ownership retention in German and U.K. IPOs, the determinants of ownership retention, and its impact on IPO long-term performance. He found that the long-run performance of IPOs is not correlated with ownership retention. Overall, he suggests that the poor long-term performance of IPOs in his sample, compared to the stock market as a whole, cannot be explained by agency conflicts caused by the reduction in ownership by the original shareholders. We focus our attention on the strategic decisions of family-owners floating their firms. We restrict our analysis for the following reasons. First, family-owned firms have long been the most typical firms in Germany to undertake a change of ownership by means of an IPO. Second, a family-owned firm comes closest to one in which ownership and control are not separated until the IPO, making it ideal for investigating the performance effect of a change in the corporate governance structure. …

During the period spanning from 2007 to 2021, China had substantial increase in its Gross Domestic Production (GDP). However, it is noteworthy that this rise was not mirrored by a commensurate expansion in China's A-share market. When examining the performance of China's stock market in relation to other major global economies within the same time frame, it becomes evident that the overall returns of China's stock market are comparatively lower. For example, Standard & Poors 500 increased 236.11%, Nasdaq Composite Index increased 547.75%, the German Stock Index 30 increased 109.99%, and Nikkei Stock Average (Nikkei 225) increased 66.21%, whereas Shanghai Stock Exchange Composite Index increased 33.41%. Based on the monthly Initial Public Offering (IPO) proceeds of China's stock market from 2007 to 2021, this paper comprehensively examines the impact of IPO activities on China's stock market, including the correlation coefficients among IPO fundraised, index amplitude, index return, and GDP. By studying the correlation between the Chinese All-securities Index (CSI) data and IPO fundraising, as well as exploring the impact of policy changes on the market, it can be concluded that IPO fundraising itself has a limited impact on market returns. The low yield in China's country's stock market might be due to corporate information asymmetry, corporate information fraud, and imperfect supervision. The contributions of this paper include the summary and interpretation of China's IPO and related data, the interpretation of China's IPO reform and other policy actions, and the suggestions for the future development direction of China's market.

The article explores the significant role of anomalies in the market for initial public offerings (IPOs), affecting both short-term and long-term stock outcomes upon entering the public market. It addresses the overarching issue faced by investors regarding the low efficiency of IPOs, characterized by a decline in securities’ value immediately after public listing. The article examines various anomalies and factors affecting IPO outcomes and discusses strategies for successful risk management and achieving desired investment results. It highlights the importance of considering underexplored aspects such as financial reporting distortions, information asymmetry, and insider manipulations, which are often encountered in IPOs but rarely studied in depth. This investigation into IPO anomalies aims to provide investors and companies with insights for making more informed decisions during IPOs and adapting their strategies according to market conditions, thereby contributing to a broader understanding of factors affecting IPO profitability. By recognizing and addressing these factors, investors and companies can better navigate the IPO process and achieve more favorable outcomes. Further research is needed to delve deeper into the complexities of IPO anomalies and their implications for market efficiency.

The start-up business in Indonesia is growing with the emergence of many new start-up companies in various fields such as technology, finance, health, and so on. Start-up companies are also increasingly seen as a sector that has great potential to become the engine of Indonesia's economy in the future, to support the growth of start-up companies, one of the strategies that is usually carried out is to carry out an Initial Public Offering (IPO). This research will help fill in the gaps in the literature on external factors influencing a company's decision to go IPO. Thus, it is hoped that the results of this research can make a positive contribution to the development of start-up businesses in Indonesia and assist start-up companies in making the right decisions regarding IPOs. The population in this study are all start-up companies in Indonesia. The samples in this study are Gojek, Grab, Ovo and Shoppe. This study used a purposive sampling technique. The sample in this study is 108. The data analysis technique in this study uses PLS with the results of the research that financial performance has a positive effect on a company's decision to conduct an Initial Public Offering (IPO), company size has a positive effect on a company's decision to conduct an Initial Public Offering (IPO). ), capital market conditions have a positive effect on a company's decision to conduct an Initial Public Offering (IPO), and government policies have a positive effect on a company's decision to conduct an Initial Public Offering (IPO).

Funding development of the company through the “Initial Public Offering” has a high representation globally, the Czech Republic unlike, and belongs to traditional methods of raising funds necessary for development of business in the developed capital markets. In the United States of America, Japan and in the Western Europe countries the method of company funding through IPO has been ap­p­lying for several decades already. The first public stock offerings began to be applied in these markets in higher volumes from the beginning of the 60th of the last century. From that period importance of IPO goes up globally and the initial public stock offerings begin to be applied more and more even in the Central and Eastern European countries. Under the conditions of the Czech capital market this way funding of development of the company, connected with its entering into the capital market, is not very usual. The Strategy of Sustainable Development of the Czech Republic considers this situation the weakness of the Czech economy, and its resolving has to be paid a due care. The present paper introduces the results of an analysis identifying the causes of the low numbers of IPOs in the Czech Republic. These causes were analyzed in a comprehensive way covering the period of time from the beginnings of the modern-day capital market in the Czech Republic until the present times. In order to reach the objective, the secondary research of the literature sources, focused on the issue in question and the primary research in the Czech companies was carried out.

Open complex systems such as financial markets evolve in highly dynamic and uncertain environments. They are often subject to significant fluctuations due to unanticipated behaviours and information. Modelling and simulating these systems by means of multi-agent systems, i.e., through artificial markets is a valuable approach. Initial Public Offering (IPO) is a process based on finding a reasonable offering price or the price of the first assets sale by a firm to public. The study of the firms' strategic choices at the IPO requires the use of formal tools like game theory. This article is about the study, analysis and simulation of a firm's dynamic evolution at IPO using the EGT (Evolutionary Game Theory) as a formal framework for IPO strategies (offering prices) through modeling a financial market by multi-agent system. The firm in the system is a cognitive agent built around a classifier system. Simulations with our prototype allow us to deduce the factors that cause IPO under pricing.

The success of initial public offers (IPOs) in India is the subject of this master's thesis. It centres on the performance of companies following an IPO, with an emphasis on listing gains and long-term performance (in relation to the market average). With a thorough examination of one of the largest initial public offerings (LICs), the thesis makes use of data from 40 IPOs that were listed on the National Stock Exchange (NSE) between January 2022 and December 2023. In order to determine whether the initial price fluctuations are substantial and long-lasting, it computes anomalous returns.By offering insights into the variables influencing IPO performance, the study hopes to assist investors, businesses, and policymakers. This can assist investors in making well-informed investment decisions, companies in making better decisions about going public, and legislators in developing efficient laws for the Indian IPO market.Because it explicitly targets the Indian market and takes into account a number of variables influencing IPO performance, the research is novel. Both domestic and foreign participants in the Indian financial system can benefit from knowing this information. KEY WORDS: INDIAN IPO, LISTING GAINS, POST-LISTING PERFORMANCE, STOCK MARKET.

We analyse 146 Indian IPOs (initial public offerings) that are introduced through a book building method from January 2007 to December 2008. We have considered all companies, which are available for trading in BSE (Bombay Stock Exchange) for three year. The evidence suggests that the Indian IPOs market is very slow after financial crisis period and more than 60% of the listed companies are trading below the listed prices. From the analysis of the data, it is identified than the Indian IPOs are underpriced in initial day of listing and underperforming in long-run. The average winning bidders earn a significant average abnormal return of 4.25% in the initial day of listing and loose more than 25% of their investment during the 3 year of share holding period. Finally, there is strong evidence that, the grading of an IPO has a significant impact on IPOs after market performance. The highest graded IPOs are underpriced in initial day of listing and highly over performed after 36 month of listing.

This chapter examines the interactions of initial public offerings (IPOs) and mergers and acquisitions (M&As), in contrast with the common approach of studying them in isolation. Of the many motivations to conduct an IPO (e.g., fundraising, access to capital, increased liquidity, publicity), several of them clearly relate to takeover activities. This chapter analyzes three key forms of interaction: (1) IPO and M&A markets interact when entrepreneurs and early investors from private firms decide to liquidate and cash out their investments. They can exit through an IPO, or they might seek an acquisition by another firm (e.g., sellout to a strategic acquirer, private equity fund, or another financial investor); (2) after a being listed, some firms become takeover targets, and some IPO firms also participate actively in the M&A market as acquirers; (3) between the IPO and M&A markets, one can be used to exert pressure on the other.