Presentation
Investor Response to Initial Public Offerings and the Subsequent Secondary Equity Offerings: Evidence from South Korea
Southwestern Finance Association annual meeting
(2010)
Abstract
The underpricing signal hypothesis for initial public offerings (IPOs), as documented by Slovin et al (1994), suggests that greater IPO underpricing creates a favorable market response to subsequent equity offerings. Employing a sample of 224 Korean firms going public with an initial public offering (IPO) along with their first seasoned equity offering (SEO), this study attempts to determine if the underpricing signal hypothesis holds in Korean markets. Contrary to findings in the U.S. markets, the results of this study reveal that there is no association between the magnitude of IPO underpricing and investor reactions to subsequent SEOs. Additionally, the market reaction to SEOs was significantly positive, which is in contradiction to the commonly observed share dilution effect in the U.S.
This study also finds that firms with the highest secondary market reactions to their IPO issues were not the fastest to enter the market with their SEO, indicating that issuers did not consider the magnitude of IPO underpricing to be a timing signal for speedy secondary issues
Keywords
- Business,
- Finance,
- Investing,
- Secondary Equity Offerings,
- South Korea
Disciplines
Publication Date
Spring 2010
Location
Dallas, TX: Federation of Business Disciplines
Citation Information
Vivek Pandey and G. H. Shin. "Investor Response to Initial Public Offerings and the Subsequent Secondary Equity Offerings: Evidence from South Korea" Southwestern Finance Association annual meeting (2010) Available at: http://works.bepress.com/vivek-pandey/36/