Does IPO subscription demand affect investor herd behavior in Taiwan?

Chao-Shi Wang, Hui-Wen Tang and Roger C.Y. Chen

International Review of Economics & Finance, 2017, vol. 51, issue C, 258-272

Abstract: Taiwan's initial public offerings (IPOs) are primarily fixed-price methods, public subscription issues that only allow individual investors to participate. The Taiwan Stock Exchange discloses subscription demand information, after which individual investors request the highest subscription rate shares; this can lead to herding. The empirical results of this study showed that investors exhibit increased attraction toward IPOs with extremely high subscription demand. After identifying sample issues with herd features, herd behavior in Taiwan's IPO market was found to be consistent with the “winner's curse” theory. Additionally, investors overreacted to subscription demand in the short run, which leads to negative long-term returns.

Keywords: Herd behavior; Information cascades; Initial public offerings overreaction; Winner's curse (search for similar items in EconPapers)
JEL-codes: G02 G11 G14 G32 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:51:y:2017:i:c:p:258-272

DOI: 10.1016/j.iref.2017.06.004

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