Made available in DSpace on 2016-03-15T19:32:21Z (GMT). No. of bitstreams: 1 Ligia Ferraci.pdf: 1333034 bytes, checksum: 7872150631d4eb40ece4b912f3149334 (MD5) Previous issue date: 2010-08-11 / Fundo Mackenzie de Pesquisa / The capital market in Brazil has experienced, especially from the year 2003 to 2009,several changes and significant growth due to the global economic and financial environment as well as internal factors highlighting the regulatory improvements, development and credibility. As a result of this growth, we have observed a large number of companies that became public especially from 2006 on. The stock price behavior during this period has showed significant short-term positive returns, even when compared to Ibovespa index rates (Sao Paulo s Stock Exchange).Some potential explanations for such events may be the stock issue below the correct price (underpricing), informational asymmetry, the winner's curse (Rock ,1986) or other market anomalies discussed in the financial theory. This research focused the study in two possible factors: (1) issue below the correct price, known in financial literature for underpricing, and (2) the risk and return function as explanatory for stock returns in IPO issued from 1st, 30.th, 60.th, 90.th and 180.th days considering the sample of companies which registered initial public offerings (IPO) from 2003 until December 2009 listed on the Bovespa and the Securities Commission (CVM) and which had daily close available prices. The objective for this study was to verify the existence of underpricing in the IPO process and whether the observed abnormal returns can be explained by the risk and return function. As for the conclusion, in line with results of other recent researches for Brazilian stock market, were observed positive returns in the short term and negative returns for long term concluding that underpricing is a practice adopted in IPO s in Brazil as well as in other developed capital markets. / O mercado de capitais no Brasil experimentou,especialmente entre os anos de 2003 a 2009,muitas mudanças e crescimento acentuado em razão do ambiente econômico-financeiro mundial, bem como de fatores internos de ordem regulatória que propiciaram seu amadurecimento, desenvolvimento e credibilidade.Como consequência deste crescimento,observou-se um grande número de empresas que abriram seu capital mais acentuadamente a partir do ano de 2006.O retorno das ações durante esta periodo mostrou valores significativos a curto prazo, mesmo se comparados aos índices médios de mercado da Bolsa de Valores de São Paulo-Bovespa. Algumas explicações possíveis para tais eventos podem ser o lançamento abaixo do preço correto (underpricing), assimetria informacional, maldição do vencedor (winner s curse), anomalias de mercado, etc. Esta pesquisa centralizou o foco de estudo em dois possíveis fatores: (1) lançamento abaixo do preço correto, denominado na literatura financeira de underpricing, e (2) a relação entre risco e retorno como explicativa para retornos das ações lançadas em IPO a partir do 1.º, 30.º, 60.º, 90.º e 180.º dias da emissão considerando a amostra das empresas que registraram ofertas iniciais (IPO) a partir de 2003 até dezembro de 2009 listadas na Bovespa e na Comissão de Valores Mobiliários (CVM) que possuíam cotações diárias de fechamento disponíveis.O objetivo do trabalho foi verificar a existência underpricing no processo de abertura de capital e se os retornos anormais verificados podem ser explicados pela relação risco e retorno.A título de conclusão e em consonância com resultados de outras pesquisas recentes para o mercado brasileiro, foram encontrados retornos positivos no curto prazo e negativos no longo prazo concluindo-se que o underpricing é uma prática adotada nos processos de IPO no Brasil assim como ocorre em outros mercados de capitais desenvolvidos.

The initial public offering (IPO) underpricing phenomenon has frequently been noticed and generally is accepted as a puzzle in financial economics. Some of the new theories, such as behavioural finance, take the underpricing puzzle as one important form of evidence. However, some aspects of IPO underpricing have not yet been fully documented and discussed in the existing literature. This thesis tries to contribute in the following three specific areas. First, we focus on the time series properties of the level of underpricing of IPO shares and document the IPO market in the Hong Kong market from 1999 to 2005. In the data sample, strong autocorrelation within the level of underpricing has been discovered. Evidence suggests the initial selling volume plays an important role in the relationship. The links between underpricing and clustering of IPOs within different industries are weak, suggesting the reasons for underpricing are related to the market liquidity rather than to the industry-specific risk characteristics. Second, we investigate the underwriting networks to explore the relationship between underwriting business and IPO related puzzles. We find that in repeated IPOs, underwriters build up reputation and accumulate knowledge of their underwriting services. One of the great advantages of the top ranked underwriters is their relationship networks with other underwriters and institutional investors. We perform a careful examination of the underwriter syndicate and investigate the relationship of the structure of the syndicate in respect of IPO performance. Moreover, the pattern of distribution in the size of syndicates is identified and is found to be significantly related to the IPO performance. The research shows that the perspective from the underwriter syndicate is not only interesting, also necessary to understand IPOs. Third, we analyse the coordination problem in the IPO. In the research, we consider the auction method as a one-stage selling and the bookbuilding method as a two-stage selling method. The model suggests that the relationship between the underpricing level and the quality of IPO shares is non-monotone. This implication is consistent with empirical observations. In addition, regarding the issuers' proceeds in the IPOs, the auction method is better than the bookbuilding method in both noisy and noisy vanishing equilibria. The bookbuilding method may be helpful in other ways, such as maintaining liquidity or price support in secondary market. By studying liquidity, business networks and the coordination problem, the thesis does not only complement the existing research by providing unique explanations for the IPO underpricing and other related puzzles, but also opens some interesting venues for future research.

Bakgrund och problem: Underprissättning har länge studerats, och fenomenet har konstaterats förekomma i en absolut majoritet av de studerade länderna. Trots detta råder ingen konsensus kring vilka teorier som förklarar underprissättning. Teorier för underprissättning är i huvudsak indelade i teorier baserade på symmetrisk eller asymmetrisk information, och de empiriska resultat som presenterats målar en spretig bild med resultat som går både emot och ger stöd för flera teorier. Mot bakgrund av den motstridighet som föreligger för teoretiska förklaringar till underprissättning har vi valt att studera ämnet noggrannare. Syfte: Studiens syfte är att, med utgångspunkt i motsägande empiriska resultat, utreda vilka olika teoretiska incitament som kan förklara underprissättning för att skapa en bättre förståelse för den komplexitet som föreligger inom teoribildningen för underprissättning. Metod: Vi applicerar i studien en kvantitativ forskningsmetodik där vi, i linje med internationella referensstudier, väljer att använda en multipel regressionsanalys med minstakvadrat-metoden för att kunna testa vilka teorier som är applicerbara för att förklara underprissättning. Vi approximerar teorierna via variabler med tillhörande hypoteser för att mäta dess individuella och ackumulerade effekt på underprissättning. Via hypotesprövning möjliggör vi en koppling mellan det statistiska resultatet och respektive teori. Slutsats: Studiens resultat stödjer såväl teorier baserade på symmetrisk som asymmetrisk information vilket illustrerar komplexiteten i fenomenet underprissättning. Med utgångspunkt i resultaten av den statistiska modellen förs en analys där teorier frikopplats från symmetri respektive asymmetri, och istället analyserats simultant. Denna analys presenterar en alternativ syn på teori kring underprissättning, där teorier tillhörande symmetrisk respektive asymmetrisk information inte är ömsesidigt uteslutande, vilket introducerar ett nytt sätt att se på teoretiska förklaringar för underprissättning. / Background and problem: Underpricing has been subject to studies for many years, and the phenomena have been observed on a vast majority of studied countries. Despite the fact that studies have been conducted, there is no consensus as to which theories might best explain underpricing. Theories explaining underpricing are mainly divided into either symmetric or asymmetric information, and the empirical results presented testifies to the theoretical discrepancy, with support for and against several theories. The theoretical discrepancy is the main reason as to why we choose to closer examine the phenomena. Purpose: The purpose of this study is, based upon contradictory empirical results, to investigate as to which different theoretical incentives can explain IPO underpricing in order to create a better understanding of the complexity regarding theory for IPO underpricing. Methodology: In the study we apply a quantitative research method in which we, similar to international reference studies, use a multiple regression analysis with an ordinary least squares approach in order to test which theories are applicable in order to explain underpricing. We approximate the theories using variables with belonging hypotheses to quantify the variables individual and accumulated effect on underpricing. Using hypothesis testing we enable a connection between the statistical results and theories explaining underpricing. Conclusions: The study’s result support both theories based upon symmetric and asymmetric information which illustrates the complexity of the phenomenon of underpricing. Based on the statistical results the authors conduct an analysis in which theories are discarded from the context of symmetric and asymmetric information and are instead analyzed simultaneously. This analysis presents an alternative view of underpricing theories, in which theories belonging to symmetric as well as asymmetric information no longer are mutually excluding, which introduces a new approach to theoretical explanations for IPO underpricing.

This thesis is an empirical event study that examines the short-run performance of initial public offerings (IPO), known as underpricing and initial return. I argue that literature which only presents equal weights could potentially give the reader a skewed understanding of the width of the concept. By using a new data set of Nordic IPOs during the period 2009-2018, I provide estimates using equal as well as market capitalization weights consistently to give a more nuanced and fair picture. The equally weighted first-day initial return is estimated to be 4.96% and the value weighted first-day initial return is estimated to be 5.32% during the examined time period. Further, the initial return is examined in relation to firm characteristics as well as quarterly index returns and issuance volume. No statistically significant characteristics that can identify additional levels of underpricing was found. Quarterly average initial returns and quarterly index returns are independent of each other. In line with previous literature the positive relationship of issuance volume and initial return is valid on a quarterly level, indicating that firms tend to go public in times of positive and higher initial returns to a greater extent.

När aktier noteras, i.e. för första gången tas upp för publik handel, är stängningskursen ofta högre än den värdering aktien åsatts innan noteringen. Detta innebär att IPOs genererar en "första-dags-avkastning" som systematiskt överstiger marknadens genomsnittliga dagsavkastning; fenomenet kallas underprissättning.  Denna studie syftar till att undersöka om underprissättning förekommer på den moderna svenska IPO-marknaden och på vilket sätt bolag inom branscherna health care och technology (HCT-bolag) skiljer sig från icke-HCT-bolag (IHCT) i detta hänseende. Studien operationaliseras huvudsakligen med regressionsanalyser med vilka sambanden mellan bolagsspecifika variabler och underprissättningen utvärderas. Empirin utgörs av IPOs mellan åren 2016 och 2018. Resultaten tyder på att HCT-bolag under urvalsperiden – som aritmetiskt medelvärde – har underprissatts i högre utsträckning än andra bolag. Vidare är också spridningen av HCT- bolagens underprissättning större än ditot för andra bolag. Sambandsanalyserna tyder på att vinstgenererande IHCT-bolag underprissatts i högre utsträckning än förlustgenererande IHCT- bolag. För HCT-bolag föreligger däremot inget sådant samband. / When stocks are listed, i.e. becomes subject to public trading, the closing price is generally higher than the initial offering price. Hence, IPOs yields a ”first day return” which systematically exceeds the average daily return on the stock market; this phenomenon is called underpricing. This study aims to examine if the modern Swedish IPO-market is subject to underpricing and how health care and technology (HCT) companies differ from non-HCT-companies (IHCT) in this regard. The study is primarily operationalized with regression analysis through which the correlation between company-specific variables and underpricing is examined. The data consists of IPOs between 2016 and 2018. The results indicate that HCT-companies during the sample period – as an arithmetic mean – have been underpriced to a larger extent than non-HCT-companies. Moreover, the variance of the underpricing is also higher for HCT-companies than for IHCT-companies. The analysis also indicate that profitable IHCT-companies is underpriced to a larger extent than non- profitable IHCT-companies. However, such a correlation does not exist for HCT-companies.

This thesis investigates three topics in empirical corporate finance. In the first essay, the focus is on the role of financial constraints in the market for corporate control. In the second and third essays, we explore the effect of personal connections at board and executive levels on corporate credit rating and initial public offering (IPO) underpricing respectively. In the first essay, using a large sample of US acquisitions made between 1985 and 2013, we study the effect of financial constraints on acquisition gains and acquisition likelihood. Our findings show that financial constraints of target companies significantly increase acquisition premiums and abnormal returns for both parties. Our results further show that the presence of financial constraints in the target is one of the most important determinants of a takeover bid. This supports the idea that acquisitions may improve the ability of financially constrained companies to access capital through a better reallocation of resources within segments of the same company (e.g., internal capital market) or through better access to external markets. This would eventually benefit bidders too, as new capital would be invested in valuable growth opportunities that otherwise would expire unexercised. In the second essay, using a large sample of US public debt issues we show that personal connections between directors of issuing companies and rating agencies result in higher credit ratings. We estimate the average effect to be about one notch. The results are robust to several alternative tests including additional controls for managerial traits, placebo tests and propensity score matching. Moreover, our tests on default rates and bond yields do not appear to reflect a favourable treatment by the rating agency. Rather, they suggest that personal connections act as a mechanism to reduce asymmetric information between the rating agency and the issuer. In the final essay, using a large sample of IPOs in the U.S. we show that interpersonal connections between directors and top executives in issuers and underwriting banks result in significantly lower levels of IPO underpricing. We also examine the issuers' long-term stock returns following their IPOs. Our results indicate that the connected companies' long-term returns are not significantly different from the non-connected companies. This suggests that underwriters set lower levels of underpricing for the connected companies not to treat them favourably, but due to better flow of and stronger reliance on soft information and lower risk exposure.

<p>The concept of grandstanding comes from Gompers (1996), in his article, he defined “to grandstand” as “to act or conduct oneself with a view to impressing onlookers”. The idea of grandstanding does not only apply solely to venture capital but also could apply to underwriters of IPOs industry as well.</p><p>IPOs activities provide huge revenues for underwriters, so underwriters compete with each other for IPO business. China’s stock market grows explosively after 2006, and it has the highest underpricing, as well as more and more underwriters have emerged recently, so our paper is constrained under Chinese stock market environment. We empirically examine whether inexperienced underwriters grandstand when they conduct IPOs in order to achieve more market shares, for example by deliberate underpricing or charging lower fee rates.</p><p>This study is conducted from the underwriter’s perspective. We use two kinds of reputation measurement methods to define “inexperienced” and “prestigious underwriters” and employ a quantitative approach to analyze the data. Evidence from a sample of 392 IPOs from June 19, 2006 to March 24, 2010 suggests that inexperienced underwriters do not have incentives to grandstand. The number of IPOs that underwriters have conducted and recent IPO performance do not always contribute to a gain of market share directly. Therefore, inexperienced underwriters do not provide more underpriced IPOs nor do they charge lower fee rates. Evidence also marginally supports that underwriters do not intend to conduct small offer sized IPOs.</p>

The concept of grandstanding comes from Gompers (1996), in his article, he defined “to grandstand” as “to act or conduct oneself with a view to impressing onlookers”. The idea of grandstanding does not only apply solely to venture capital but also could apply to underwriters of IPOs industry as well. IPOs activities provide huge revenues for underwriters, so underwriters compete with each other for IPO business. China’s stock market grows explosively after 2006, and it has the highest underpricing, as well as more and more underwriters have emerged recently, so our paper is constrained under Chinese stock market environment. We empirically examine whether inexperienced underwriters grandstand when they conduct IPOs in order to achieve more market shares, for example by deliberate underpricing or charging lower fee rates. This study is conducted from the underwriter’s perspective. We use two kinds of reputation measurement methods to define “inexperienced” and “prestigious underwriters” and employ a quantitative approach to analyze the data. Evidence from a sample of 392 IPOs from June 19, 2006 to March 24, 2010 suggests that inexperienced underwriters do not have incentives to grandstand. The number of IPOs that underwriters have conducted and recent IPO performance do not always contribute to a gain of market share directly. Therefore, inexperienced underwriters do not provide more underpriced IPOs nor do they charge lower fee rates. Evidence also marginally supports that underwriters do not intend to conduct small offer sized IPOs.

Bakgrund/Motiv: Historiskt sett tillämpades vanligen fast prissättning vid börsintroduktioner vilket innebar att aktierna ofta blev underprissatta och det var lätt för investerare att generera hög avkastning första handelsdagen. Numera används i större utsträckning anbudsförfarande och intervallprissättning där investerare lämnar anbud om pris och antal vilket har minskat underprissättningen. Studien utgår från att en del av marknadens förväntningar inkluderas i priset vid intervallprissättning vilket i sin tur skulle minska aktiens volatilitet efter introduktion. Syfte: Syftet med denna studie är att undersöka om aktiens volatilitet skiljer sig efter att den introducerats beroende på vilken av de två metoderna som använts för att prissätta aktien samt hur val av prissättningsmetod påverkar en aktiens underprissättning och avkastning efter introduktionen. Genomförande: Studien består av kvantitativa historiska data i form av aktiekurser och övrig information från de prospekt som upprättats i samband med bolagens introduktion på börsen. Utöver bearbetning av data och analyser i Excel har ett flertal ekonometriska tester genomförts med hjälp av ickelinjära regressionsanalyser där prissättningsmetod, betavärde, underprissättning och varians testats som beroende variabel mot ett flertal kombinationer av förklarande variabler. Slutsats: Studien visar att bolag som tillämpat fast prissättning uppvisar högre volatilitet efter börsintroduktion och att valet av prissättningsmetod därmed har en viss påverkan på volatiliteten. Vidare kan det konstateras att dessa bolag generellt varit mer underprissatta och genererat högre avkastning det första handelsåret. / Background: In the past, most companies performing an Initial Public Offering, IPO, applied the fixed pricing method, which often lead to an extensive underpricing of the shares. By doing so, it was easy for investors to gain high return on the first trading day. Nowadays, companies use auction pricing to a greater extent where investors bid for a certain amount of shares to a certain price. This procedure has resulted in a decrease of the underpricing. With the assumption that some of the market’s expectations are included in the price, whilst using an auction pricing method, these stocks would possibly appear less volatile after the IPO. Purpose: The aim of this study is to investigate whether the volatility of the shares is different after the introduction on the market, based on which method that has been applied when pricing the shares. The thesis also investigates to what extent the choice of pricing method influences the underpricing and returns of a share after its introduction. Method: The study comprises quantitative historical data, such as share prices as well as additional information gathered from the prospectus of each IPO. In addition to arranging the data and the analyses, made in Excel, numerous econometric analyses have been made by using non-linear regressions, where variables such as pricing method, beta, underpricing on the first trading day, and variance have been examined as a dependent variable in relation to several different combinations of explanatory variables. Findings: The study finds that companies that have practiced a fixed pricing method show a higher volatility after the introduction on the market. Thus, the choice of either pricing method has some influence on the volatility. Furthermore, it was proved that companies using a fixed pricing method were more underpriced and gained higher returns during the first year of trading compared to companies using an auction pricing method.

Prior studies show the evidence of non-financial variables such as marketing affects investor¡¦s response to risky asset pricing, and indicate that the distribution of risky asset returns is asymmetric and non-nomality, implying using Ordinary Least Squares (OLS) method with the assumption of normal distributions may lead to unreliable estimates. This study tries to apply quantile regression to the analysis of the sample in order to avoid estimation bias. This study examines whether a firm¡¦s pre-IPO marketing expenditures affects its¡¦ initial public offering (IPO) underpricing in Japan and examine whether market states influence the existing relation between pre-IPO marketing expenditures and IPO underpricing. The empirical results shows: (1) pre-IPO marketing expenditures significantly reduce IPO underpricing levels, (2) pre-IPO marketing expenditures can reduce IPO underpricing levels following bear markets as it cannot reduce IPO underpricing levels following bull markets. Therefore, as firms decide to use marketing strategies to make their firm remarkable, and in turns without concerning for market states to reduce the degree of IPO underpricing, their objective may not be reached.