As a Matter of Interest - Whose Money is it Anyway?

26 Pages Posted: 19 Sep 2006

See all articles by Chee Keong Low

Chee Keong Low

Chinese University of Hong Kong (CUHK) - School of Accountancy

Abstract

Tianjin Port Development Holdings Limited set a world record when the retail portion of its initial public offering in Hong Kong was oversubscribed by a massive 1,703 times. This unprecedented heavy demand is estimated to have earned the company about HK$95.3 million, or some US$12.3 million, in interest income simply by placing the application moneys in overnight money market accounts as it prepares to allot the shares to the subscribers.

The confluence of highly favourable conditions namely, rising interest rates coupled with the euphoria over the listing of Mainland Chinese companies is conservatively estimated to result in HK$1.2 billion, or almost US$155 million, in gross interest income accruing to the companies that list on the Stock Exchange of Hong Kong during 2006. Using data from the 17 initial public offerings in Hong Kong for the five months to 31 May 2006, this paper highlights some shortcomings of the existing system and puts forth recommendations for their rectification which principal objective is a more equitable application of this 'windfall'.

Keywords: Initial Public Offerings, Interest Income, Corporate Governance

JEL Classification: G34, G38, K22

Suggested Citation

Low, Chee Keong, As a Matter of Interest - Whose Money is it Anyway?. European Business Law Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=930911

Chee Keong Low (Contact Author)

Chinese University of Hong Kong (CUHK) - School of Accountancy ( email )

1018 Cheng Yu Tung Building
Shatin, N.T.
Hong Kong
(852) 3943-7891 (Phone)
(852) 2603-5114 (Fax)

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