Underpricing, Risk Management, Hot Issue and Crowding out Effects: Evidence From the Australian Resources Sector Initial Public Offerings

Hoa Nguyen (), Bill Dimovski () and Robert Brooks
Additional contact information
Hoa Nguyen: School of Accounting, Economics and Finance, Deakin University, 221 Burwood Highway, Burwood VIC 3125, Australia

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2010, vol. 13, issue 03, 333-361

Abstract: 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.

Keywords: Initial public offerings; underpricing; risk management; industry competition effect; hot issue market (search for similar items in EconPapers)
JEL-codes: G1 G2 G3 (search for similar items in EconPapers)
Date: 2010
References: View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S0219091510001974
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:rpbfmp:v:13:y:2010:i:03:n:s0219091510001974

Ordering information: This journal article can be ordered from

DOI: 10.1142/S0219091510001974

Access Statistics for this article

Review of Pacific Basin Financial Markets and Policies (RPBFMP) is currently edited by Cheng-few Lee

More articles in Review of Pacific Basin Financial Markets and Policies (RPBFMP) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().