Collateral Regulation and IPO-Specific Liberalization: The Case of Price Limits in the Athens Stock Exchange

European Financial Management Journal, Vol. 22, Issue 2, pp. 276-312, 2016

49 Pages Posted: 2 Nov 2007 Last revised: 5 Dec 2016

See all articles by Stavros Thomadakis

Stavros Thomadakis

National and Kapodistrian University of Athens - Faculty of Economics

Dimitrios Gounopoulos

University of Bath

Christos Panagiotis Nounis

National and Kapodistrian University of Athens - Faculty of Economics

Andreas G. Merikas

University of Piraeus

Date Written: May 30, 2014

Abstract

This paper uses a unique testing ground on the effect of price limits upon IPO pricing and initial returns. The Athens Stock Exchange offers the opportunity for this new experiment, as three substantial changes in limit regulations were implemented in a short period of eight years. The results indicate significant differences in initial returns. Effective price limits reduce underpricing in all market segments, without visible diminution of IPO activity. The introduction of mandatory book-building after price limits were phased out in Athens also led to reduced underpricing in the main market segment. Nevertheless, the existence of an independent effect of price limits explains why some regulators continue to use them to the present day.

Keywords: Price Limits, IPO Underpricing, IPO Regulation, Government Intervention, Hot/Cold Market Conditions

JEL Classification: G14, G32, G24

Suggested Citation

Thomadakis, Stavros and Gounopoulos, Dimitrios and Nounis, Christos Panagiotis and Merikas, Andreas G., Collateral Regulation and IPO-Specific Liberalization: The Case of Price Limits in the Athens Stock Exchange (May 30, 2014). European Financial Management Journal, Vol. 22, Issue 2, pp. 276-312, 2016 . Available at SSRN: https://ssrn.com/abstract=1026378 or http://dx.doi.org/10.2139/ssrn.1026378

Stavros Thomadakis

National and Kapodistrian University of Athens - Faculty of Economics ( email )

8 Pesmazoglou street
GR-10559 Athens
Greece
3-0 1 3236021 (Phone)
3-0 1 3225542 (Fax)

Dimitrios Gounopoulos (Contact Author)

University of Bath ( email )

School of Management,
Wessex House, Claverton Down
Bath, BA2 7AY
United Kingdom

Christos Panagiotis Nounis

National and Kapodistrian University of Athens - Faculty of Economics ( email )

8 Pesmazoglou street
GR-10559 Athens
Greece

Andreas G. Merikas

University of Piraeus ( email )

Piraeus, LA
Greece

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