Book Description
In this study, I have reviewed companies that conducted IPOs between 1990 and 2004, measuring the underpricing, which represents the ratio of the initial offering price to the price immediately after the listing, and considered the explanatory factors from a statistical point of view. There are quite a few empirical studies about IPO underpricing including those which studied Japanese companies, but in conducting this study, I broke the Japanese companies that conducted IPOs in Japan into those which were more interested in the maximization of the offering price and those which are more interested in the success of future offers at market price, hypothesizing nevertheless that both types of companies have made their choice for the purpose of minimizing the opportunity loss for the existing shareholders that arises from the underpricing, and the amount of loss that arises from dilution. In Japan, apart from the IPOs by entrepreneurs, there are many cases of public offerings by subsidiaries or affiliated companies of industrial companies that are listed companies themselves.I hypothesized that many of the former companies seek lower costs and higher post-offering liquidity, while many of the latter companies seek markets that represent smaller underpricing even at a higher cost. In Japan, two groups of markets where IPOs are possible have long coexisted; the second section and regional markets, and JASDAQ and markets for emerging companies, competing with each other without one overpowering the other. As a factor to explain this fact, I will point to the unique characteristics that each group offers that suit the different purposes of the companies conducting an IPO.In this study, taking into consideration the endogenous relationship between the IPO underpricing and the number of offered/sold shares, I have estimated the model that explains the choice of listing market by the IPO company in the first step, and, taking the result into consideration, I have introduced a simultaneous equation model to perform OLS estimation to explain underpricing in the second step.
