The Benefit of Excluding Institutional Investors from Fixed-Price IPOs: Evidence from Taiwan

Anlin Chen and Lanfeng Kao

Emerging Markets Finance and Trade, 2006, vol. 42, issue 6, 5-24

Abstract: A simple way to mitigate the winner's curse in initial public offerings (IPOs) is to reduce the number of informed investors in IPO markets. In Taiwan, institutional investors are not permitted to subscribe to fixed-price IPOs. Excluding institutional investors raises uninformed investors' allocation rates. We show that the winner's curse is still present in Taiwan's fixed-price IPO markets even without the participation of institutional investors, but that IPO underpricing is reduced by at least 4 percent due to alleviating the winner's curse, as institutional investors are excluded from the fixed-price offerings.

Keywords: auctioned offerings; fixed-price offerings; initial public offerings; institutional investors; winner's curse (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (2)

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