This research examines the relationship between IPOs allocation and underpricing and also investigates the flipping activity in the first two trading days of IPOs issued between 2004 and 2018 in the Stock Exchange of Thailand. In the IPOs allocation and underpricing part of study, the results give a little support to adverse selection hypothesis. I document non-significant positive relationship between institutional allocation and underpricing. However, foreign allocation has significant negative relationship with underpricing which is not consistent with Abrahamson & Ridder (2015) who find that foreign investors hold more on higher level of underpricing IPOs. However, company’s sponsorship allocation is found to have significant positive relationship with underpricing. I also find that the change in regulation by SEC about company’s sponsorship allocation decreases overall IPOs’ underpricing level. Moreover, this paper documents that institutional and foreign investors are found to be net seller while individual investors are net buyer in the first two trading days. Institutional investors flip the IPOs shares the most compared to other investors which is consistent with previous study (Bayley et al., 2006) that institutions are instead of being long-term investors to IPO firms, but they try to capture the short run profits. This paper also finds the significant positive relationship between turnover rate and the degree of underpricing while flipping rate by each type of investors cannot be explained by level of underpricing.
SHARES ALLOCATION, UNDERPRICING AND INVESTORS FLIPPING ACTIVITY DURING IPO: EVIDENCE FROM THE STOCK EXCHANGE OF THAILAND
Post by MSF Chula at Sunday, 31 January 2021 10:30 PM
Last updated at Sunday, 31 January 2021 10:30 PM