An Empirical Examination of IPO Underpricing Between High-Technology and Non-High-Technology Firms in Taiwan

Abstract

This study investigates the determinants of initial public offering (IPO) underpricing by focusing on variables relating to information asymmetry, investor sentiment, and corporate governance and examines whether the determinants of IPO underpricing in high-technology and non-high-technology IPOs differ. With the data from Taiwan from 2009-2011, this study finds that overallotment is negatively related to underpricing, whereas market momentum, first day trading volume, and managers’ ownership retention rates are positively related to underpricing, particularly for high-technology IPOs. Our results support the signaling hypothesis in high-technology IPOs.

Keywords: High-Tech; Information Asymmetry; Initial Public Offering (IPO); Underpricing; Valuation

JEL Classification: G12; G14; G24; G32