The Role of Financial Variables in the Pricing of Korean Initial Public Offerings

Pacific-Basin Finance Journal Volume 3, Issue 4, December 1995, Pages 449–464

University of Alberta School of Business Research Paper No. 2013-1064

Posted: 2 Jul 2013

See all articles by Jason Lee

Jason Lee

University of Alberta

Jeong-Bon Kim

City University of Hong Kong

Itzhak Krinsky

Deutsche Bank Alex. Brown

Date Written: June 1, 1994

Abstract

Using a sample of 260 initial public offerings (IPOs) listed on the Korea Stock Exchange during the January 1985 – March 1990 period, this paper investigates the role of information disclosed through the prospectus in the new issues market. The evidence indicates that the market price is significantly affected by financial variables, such as earnings per share, offer size, industry-wide prospects, and offer type. The inclusion of potential signalling variables does not increase the explanatory power and predictive ability of the model. We also find that the market price is more closely associated with these financial variables after the 1988 liberalization of Korean IPO pricing than it was before. This study, therefore, highlights the importance of financial variables contained in the offering prospectus for the pricing of IPOs in the new issues market where information is scarce.

Keywords: Initial Public Offerings, Role of financial variables

JEL Classification: G12, G15

Suggested Citation

Lee, Jason and Kim, Jeong-Bon and Krinsky, Itzhak, The Role of Financial Variables in the Pricing of Korean Initial Public Offerings (June 1, 1994). Pacific-Basin Finance Journal Volume 3, Issue 4, December 1995, Pages 449–464, University of Alberta School of Business Research Paper No. 2013-1064, Available at SSRN: https://ssrn.com/abstract=2281359

Jason Lee (Contact Author)

University of Alberta ( email )

Edmonton, Alberta T6G 2R6
Canada
780-492-4839 (Phone)
780-492-3325 (Fax)

Jeong-Bon Kim

City University of Hong Kong ( email )

Department of Accountancy
83 Tat Chee Avenue
Kowloon Tong
Hong Kong
852-3442-7909 (Phone)

Itzhak Krinsky

Deutsche Bank Alex. Brown

New York, NY
United States

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