Underwriting in the Australian IPO Markets: Determinants and Pricing
65 Pages Posted: 29 May 2019
Date Written: May 2, 2019
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: Suggested Citation