Listing Requirements, Uncertainty, and Underpricing of Ipos

Posted: 22 Oct 2000

See all articles by S.L. Cheung

S.L. Cheung

affiliation not provided to SSRN

Richard Ho

City University of Hong Kong (CityUHK) - Department of Economics & Finance

Stephen Yan-Leung Cheung

City University of Hong Kong (CityUHK) - Department of Economics & Finance

Date Written: April 1993

Abstract

A direct test of Rock's model using 99 IPOs issued on the Stock Exchange of Hong Kong (SEHK) reveals that Rock's model may not hold, in that small to medium investors do get significantly positive rationing-adjusted excess returns. The excess returns detected, however, are primarily accrued to IPOs issued after the implementation of the new listing rules which allow smaller and younger firms to be listed on the SEHK. The size effect does not seem to exist as both smaller and larger issues are significantly underpriced. While the underpricing phenomenon may be caused by the uncertainty introduced by the new listing rules, there seems to be a convergence towards the prediction made by Rock's model, in that the underpricing is getting weaker over time.

JEL Classification: F00

Suggested Citation

Cheung, S.L. and Ho, Richard Yan-ki and Cheung, Stephen Yan-Leung, Listing Requirements, Uncertainty, and Underpricing of Ipos (April 1993). Available at SSRN: https://ssrn.com/abstract=5861

S.L. Cheung

affiliation not provided to SSRN

Richard Yan-ki Ho (Contact Author)

City University of Hong Kong (CityUHK) - Department of Economics & Finance ( email )

Kowloon
Hong Kong

Stephen Yan-Leung Cheung

City University of Hong Kong (CityUHK) - Department of Economics & Finance ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong
+852 2788 7960 (Phone)
+852 2788 8806 (Fax)

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