TY - JOUR
T1 - The impact of the costs of subscription on measured IPO returns
T2 - The case of Asia
AU - Fung, Joseph K.W.
AU - Cheng, Louis T.W.
AU - Chan, Kam C.
N1 - Funding Information:
This research is supported by a grant from Hong Kong Baptist University and a departmental research grant from Hong Kong Polytechnic University (G-S 852). We are grateful to Ann Sherman for her valuable input to the research design and Castor Pang for his excellent research assistance. We also thank an anonymous referee and Jeffry Netter, the Editor, for their helpful comments. We are responsible for any remaining errors.
PY - 2004/6
Y1 - 2004/6
N2 - Asian initial public offerings (IPOs) require investors to pay subscription funds up-front upon submission of applications, and these funds are locked-up for 1-3 weeks without interest. Hence, the IPO process entails an explicit financing cost (opportunity cost) whether investors borrow funds or use their own funds to apply for IPO shares. The IPO subscription costs are not trivial, especially in a high interest rate environment or when an IPO is highly oversubscribed. These costs should be considered in any comparison of IPO returns across countries.
AB - Asian initial public offerings (IPOs) require investors to pay subscription funds up-front upon submission of applications, and these funds are locked-up for 1-3 weeks without interest. Hence, the IPO process entails an explicit financing cost (opportunity cost) whether investors borrow funds or use their own funds to apply for IPO shares. The IPO subscription costs are not trivial, especially in a high interest rate environment or when an IPO is highly oversubscribed. These costs should be considered in any comparison of IPO returns across countries.
KW - Asian IPOs
KW - Initial public offerings
KW - Non-discretionary allocation
UR - http://www.scopus.com/inward/record.url?scp=1642270173&partnerID=8YFLogxK
U2 - 10.1016/j.jcorpfin.2003.08.002
DO - 10.1016/j.jcorpfin.2003.08.002
M3 - Article
AN - SCOPUS:1642270173
SN - 0929-1199
VL - 10
SP - 459
EP - 465
JO - Journal of Corporate Finance
JF - Journal of Corporate Finance
IS - 3
ER -