Underpricing, risk management, hot issue and crowding out effects : evidence from the Australian resources sector initial public offerings

Nguyen, Hoa, Dimovski, William and Brooks, Robert 2010, Underpricing, risk management, hot issue and crowding out effects : evidence from the Australian resources sector initial public offerings, Review of Pacific Basin financial markets and policies, vol. 13, no. 3, pp. 333-361.

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Title Underpricing, risk management, hot issue and crowding out effects : evidence from the Australian resources sector initial public offerings
Author(s) Nguyen, Hoa
Dimovski, William
Brooks, Robert
Journal name Review of Pacific Basin financial markets and policies
Volume number 13
Issue number 3
Start page 333
End page 361
Total pages 29
Publisher World Scientific Publishing Co Pty. Ltd.
Place of publication Singapore
Publication date 2010
ISSN 0219-0915
1793-6705
Keyword(s) Initial public offerings
underpricing
risk management
industry competition effect
hot issue market
Summary The main purpose of this paper is to explore the role of risk management, speculative industry competition effect and hot issue markets. We used a sample of 260 initial public offerings (IPOs) in the Australian resource sector for the 1994–2004 period to test the underpricing effect. We do not find any evidence that risk management can reduce the uncertainty relating to the new issue and hence alleviate the extent of underpricing. A plausible explanation for this lack of evidence is the poor information content of publicly available disclosures regarding risk management activities of IPO firms. We further provide evidence that the underpricing returns for resources IPOs are not impacted upon by the strength of alternative speculative IPO markets. We also show that the degree of underpricing adjusts to both market return in the preceding three months and the average underpricing of resources IPOs in the 12 month period leading to the float which offers an explanation to the hot issue effect observed in the IPO market.
Language eng
Field of Research 150299 Banking, Finance and Investment not elsewhere classified
Socio Economic Objective 970114 Expanding Knowledge in Economics
HERDC Research category C1 Refereed article in a scholarly journal
HERDC collection year 2010
Copyright notice ©2010, World Scientific Publishing
Persistent URL http://hdl.handle.net/10536/DRO/DU:30031250

Document type: Journal Article
Collections: Faculty of Business and Law
School of Accounting, Economics and Finance
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