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Asian Review of Financial Research, Vol., No..
pp.2134~2171
pp.2134~2171
Regulatory Environment, Changing Incentives, and IPO Underpricing at the Kosdaq Market
Inseok Shin Associate Professor College of Business Administration Chung-Ang University
I examine the importance of opportunity cost of underpricing to agents in explaining underpricing at the Kosdaq market. I present a simple model and identify parameters that can affect underwriter ¡®s or issuer¡®s opportunity cost of underpricing. In the model same parameters can be related to both underwriter¡®s and issuer¡®s opportunity cost, which prevent easy empirical identification of the relations in a homogeneous environment. Making use of the regulatory change in August 2003 that took differential impacts on underwirtier¡®s and issuer¡®s opportunity cost of underpricing, I formulate four testable hypotheses and find the empirical results supportive of the hypotheses. The results suggest that to fully explain underpricing, it is crucial to take into account non-informational environment including regulations that systematically influence agents¡® incentives to control or generate underpricing.
Inseok Shin
I examine the importance of opportunity cost of underpricing to agents in explaining underpricing at the Kosdaq market. I present a simple model and identify parameters that can affect underwriter ¡®s or issuer¡®s opportunity cost of underpricing. In the model same parameters can be related to both underwriter¡®s and issuer¡®s opportunity cost, which prevent easy empirical identification of the relations in a homogeneous environment. Making use of the regulatory change in August 2003 that took differential impacts on underwirtier¡®s and issuer¡®s opportunity cost of underpricing, I formulate four testable hypotheses and find the empirical results supportive of the hypotheses. The results suggest that to fully explain underpricing, it is crucial to take into account non-informational environment including regulations that systematically influence agents¡® incentives to control or generate underpricing.
Initial Public Offering (IPO),Underpricing,Incentive,Underwriter,Market Making Regulation