Factors affecting the short-run return of e-business IPOs

Lam, Derek Ko Ching. (2001). Factors affecting the short-run return of e-business IPOs Master's Thesis, School of Business, The University of Queensland.

       
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Author Lam, Derek Ko Ching.
Thesis Title Factors affecting the short-run return of e-business IPOs
School, Centre or Institute School of Business
Institution The University of Queensland
Publication date 2001
Thesis type Master's Thesis
Total pages 93
Language eng
Subjects 14 Economics
Formatted abstract Underpricing of stock is a typical phenomenon at the time of the initial public offering (IPO). Without exception, the IPOs of e-businesses also exhibit underpricing. The average initial return from the offering to the first aftermarket price is 66.98 percent for the period of 1991 to 2000. This thesis examines some factors that might affect the short-run underpricing of e-business IPOs from 1991 to 2000. These factors include the e-business type, reputation of underwriters and auditors, issue size, and firm size. The effect of e-business type upon the extent of underpricing is analysed through classification of firms into Business-to-Business (B2B), Business-to-Consumer (B2C), or both. However, the results obtained in this research shows that the e-business type effect is insignificant on the first trading day, but negatively significant after one week and four weeks respectively. This indicates that B2B firms experience more underpricing in the IPOs. Moreover, underwriters and auditors appear to play a different role in the e-business industry. The reputable underwriters help increase underpricing, whereas the reputable auditors make no significant contribution to underpricing. This is contradictory to the prediction of the certification hypothesis, which is widely proposed in antecedent literature. In addition, the results show that firm size does matter. However, understanding why firm size is positively and significantly associated with underpricing in the e-business industry requires further research.

 
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