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

Hoa Nguyen (), Bill Dimovski () and Robert Brooks
Additional contact information
Hoa Nguyen: Deakin University, http://www.deakin.edu.au/buslaw/aef/staff/profiles/nguyenh.php

No 2007_17, Accounting, Finance, Financial Planning and Insurance Series from Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance

Abstract: In this paper, we provide a comprehensive investigation of 260 initial public offerings (IPOs) in the Australian resource sector for the 1994 – 2004 period. Consistent with the existing IPO literature, we document a 16.13% underpricing return by firms in the sample. Despite the contention that risk management can reduce the uncertainty relating to the new issue and hence alleviates the extent of underpricing, we do not find any evidence in support of such contention. In addition to the conventional variables used to explain IPOs underpricing, we further provide evidence that the demand for resources IPOs is not ‘crowded-out’ by the strength of alternative IPO markets. We also show evidence that the issue price adjusts to both market return in preceding 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; crowding-out effect; hot issue market. (search for similar items in EconPapers)
JEL-codes: G15 (search for similar items in EconPapers)
Date: 2007-10-24
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://www.deakin.edu.au/buslaw/aef/workingpapers/papers/2007_17aef.pdf (application/pdf)

Related works:
Journal Article: Underpricing, Risk Management, Hot Issue and Crowding out Effects: Evidence From the Australian Resources Sector Initial Public Offerings (2010)
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: http://EconPapers.repec.org/RePEc:dkn:acctwp:aef_2007_17

Access Statistics for this paper

More papers in Accounting, Finance, Financial Planning and Insurance Series from Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance
Address: 221 Burwood Highway, Burwood 3125
Series data maintained by Dr Xueli Tang ().