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Collateral Regulation and IPO‐Specific Liberalisation: the Case of Price Limits in the Athens Stock Exchange
Author(s) -
Thomadakis Stavros,
Gounopoulos Dimitrios,
Nounis Christos,
Merikas Andreas
Publication year - 2016
Publication title -
european financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.311
H-Index - 64
eISSN - 1468-036X
pISSN - 1354-7798
DOI - 10.1111/eufm.12051
Subject(s) - initial public offering , stock exchange , monetary economics , liberalization , stock (firearms) , collateral , economics , business , financial economics , finance , market economy , mechanical engineering , engineering
This paper uses a unique testing ground on the effect of price limits upon IPO pricing and initial returns. The Athens Stock Exchange offers the opportunity for this new experiment, as three substantial changes in limit regulations were implemented in a short period of eight years. The results indicate significant differences in initial returns. Effective price limits reduce underpricing in all market segments, without visible diminution of IPO activity. The introduction of mandatory book‐building after price limits were phased out in Athens also led to reduced underpricing in the main market segment. Nevertheless, the existence of an independent effect of price limits explains why some regulators continue to use them to the present day.