Underwriting in the Australian IPO Markets: Determinants and Pricing

65 Pages Posted: 29 May 2019

See all articles by Alastair Marsden

Alastair Marsden

University of Auckland - Business School

Zoltan Murgulov

Monash University - Department of Banking and Finance, Monash Business School; Financial Research Network (FIRN)

S. Ghon Rhee

University of Hawaii - Shidler College of Business; University of Hawaii - Department of Financial Economics and Institutions

Madhu Veeraraghavan

T.A. PAI Management Institute, Finance Area

Date Written: May 2, 2019

Abstract

We examine the factors that explain the underwriting decision and underwriting fees for a sample of Australian Initial Public Offerings (IPOs), spanning the period 1999-2016. This includes young and often unprofitable IPOs that list as Commitments Test Entities (CTEs). We find: (i) CTE IPOs are more likely to be underwritten than non-CTE IPOs; (ii) IPOs that allow oversubscription of the shares and/or are issued by way of a bookbuild are less likely to be underwritten; and, for underwritten offers, we find (iii) greater initial returns and wealth loss to pre-existing shareholders for bookbuild IPOs and lower initial returns (wealth loss) in IPOs that allow oversubscription of the shares.

Keywords: Initial public offerings; Commitments test entity; Underwriting; Bookbuild; Australian Securities Exchange

JEL Classification: G12, G19, G38

Suggested Citation

Marsden, Alastair D.E. and Murgulov, Zoltan and Rhee, S. Ghon and Veeraraghavan, Madhu, Underwriting in the Australian IPO Markets: Determinants and Pricing (May 2, 2019). Available at SSRN: https://ssrn.com/abstract=3381722 or http://dx.doi.org/10.2139/ssrn.3381722

Alastair D.E. Marsden

University of Auckland - Business School ( email )

Private Bag 92019
Room: C208
Auckland
New Zealand
64 9 373 7999 (Phone)
64 9 373 7406 (Fax)

Zoltan Murgulov (Contact Author)

Monash University - Department of Banking and Finance, Monash Business School ( email )

900 Dandenong Rd
Caulfield East
Victoria 3145
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

S. Ghon Rhee

University of Hawaii - Shidler College of Business ( email )

2404 Maile Way
C-304, FEI/CBA
Honolulu, HI 96822
United States

University of Hawaii - Department of Financial Economics and Institutions ( email )

United States

Madhu Veeraraghavan

T.A. PAI Management Institute, Finance Area ( email )

Bangalore
Manipal, Karnataka 576104
India
+91-820-2701030 (Phone)

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