Offer pricing of Australian industrial initial public offers
Article
Article Title | Offer pricing of Australian industrial initial public offers |
---|---|
ERA Journal ID | 19059 |
Article Category | Article |
Authors | Cotter, Julie (Author), Goyen, Michelle (Author) and Hegarty, Sherryl (Author) |
Journal Title | Accounting and Finance |
Journal Citation | 45 (1), pp. 95-125 |
Number of Pages | 31 |
Year | 2005 |
Publisher | John Wiley & Sons |
Place of Publication | Melbourne, Australia |
ISSN | 0810-5391 |
1467-629X | |
Digital Object Identifier (DOI) | https://doi.org/10.1111/j.l467-629x.2004.00137.x |
Web Address (URL) | http://www.blackwellpublishing.com/permis.asp?ref=0810-5391&site=1 |
Abstract | In the present paper we examine the setting of offer prices for Australian industrial initial public offers (IPOs) by fixed price offers. Our investigation focuses on the associations between offer prices and both market prices and accounting based measures of intrinsic value. Fixed-price offers are less likely to be influenced by the canvassing of market demand when compared to the US setting, where book-builds are typically used. We conclude that while Australian industrial IPOs are underpriced, they are not systematically undervalued. Contrary to research undertaken by Purnanandam and Swaminathan in the US book-build setting, we do not conclude that Australian IPOs are systematically overvalued. As part of our analysis, we develop an empirical model of offer prices based on interviews with several leading Australian stockbrokers involved in setting them. Finally, using the ratio of offer price to intrinsic value measure, we find some evidence that undervaluation is positively related to underpricing. |
Keywords | offer prices; offer pricing; Australian industrial initial public offers |
ANZSRC Field of Research 2020 | 350208. Investment and risk management |
380109. Industry economics and industrial organisation | |
380304. Microeconomic theory | |
Public Notes | File reproduced in accordance with the copyright policy of the publisher/author. |
Byline Affiliations | School of Accounting, Economics and Finance |
Management Development and Research Centre | |
FKP, Australia |
https://research.usq.edu.au/item/9xqx4/offer-pricing-of-australian-industrial-initial-public-offers
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