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How Bookbuilding Information Affects Korean IPO Pricing Processes
Author(s) -
Eom Chanyoung,
Jun SangGyung
Publication year - 2013
Publication title -
asia‐pacific journal of financial studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.375
H-Index - 15
eISSN - 2041-6156
pISSN - 2041-9945
DOI - 10.1111/ajfs.12036
Subject(s) - initial public offering , underwriting , business , discretion , institutional investor , monetary economics , set (abstract data type) , finance , accounting , economics , computer science , corporate governance , political science , law , programming language
Using unique initial public offering ( IPO ) bookbuilding datasets, we examine how premarket auctioning activities, measured using oversubscription and institutional bids, affect the price‐setting practices of underwriters in Korean IPO s. Three key findings emerge. First, final offer prices are set higher when institutional investors consider IPO s more favorably and thus bid more aggressively. Next, IPO underpricing increases with oversubscription and institutional bids increase with positive pricing information. Finally, the enhanced discretion over pricing of IPO shares prompted by the regulatory change in 2007 improves the efficacy of the IPO pricing processes by inspiring institutional investors to reveal their positive information more willingly.