Institutional bidding behaviors during IPO bookbuilding: Evidence from Korea

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

Using a unique Korean initial public offering bookbuilding dataset, this study examines the impacts of presales to institutions and premarket interest on institutional bidding decisions, and makes the following observations. First, there is no significant relationship between presales and bidding decisions. This can be attributed to the fact that Korean underwriters offer institutions more allocations of less underpriced shares. Second, institutions become more willing to bid aggressively as premarket interest increases. Third, institutional incentive to submit aggressive bids is positively related to underwriter pricing discretion. Fourth, bidding strategies are conditional on the different degrees of pricing discretion. Overall, this study's evidence concludes the endogeneity of institutional bidding decisions in premarket auctions.

Original languageEnglish
Pages (from-to)413-427
Number of pages15
JournalJournal of Corporate Finance
Volume48
DOIs
StatePublished - 2018 Feb 1

Fingerprint

Bidding behavior
Bookbuilding
Bidding
Korea
Underwriters
Pricing
Bid
Discretion
Bidding strategy
Initial public offerings
Endogeneity
Auctions
Incentives

Keywords

  • Bookbuilding
  • Initial public offering
  • Institutional bidding decision

Cite this

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title = "Institutional bidding behaviors during IPO bookbuilding: Evidence from Korea",
abstract = "Using a unique Korean initial public offering bookbuilding dataset, this study examines the impacts of presales to institutions and premarket interest on institutional bidding decisions, and makes the following observations. First, there is no significant relationship between presales and bidding decisions. This can be attributed to the fact that Korean underwriters offer institutions more allocations of less underpriced shares. Second, institutions become more willing to bid aggressively as premarket interest increases. Third, institutional incentive to submit aggressive bids is positively related to underwriter pricing discretion. Fourth, bidding strategies are conditional on the different degrees of pricing discretion. Overall, this study's evidence concludes the endogeneity of institutional bidding decisions in premarket auctions.",
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Institutional bidding behaviors during IPO bookbuilding : Evidence from Korea. / Eom, Chanyoung.

In: Journal of Corporate Finance, Vol. 48, 01.02.2018, p. 413-427.

Research output: Contribution to journalArticle

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T1 - Institutional bidding behaviors during IPO bookbuilding

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AB - Using a unique Korean initial public offering bookbuilding dataset, this study examines the impacts of presales to institutions and premarket interest on institutional bidding decisions, and makes the following observations. First, there is no significant relationship between presales and bidding decisions. This can be attributed to the fact that Korean underwriters offer institutions more allocations of less underpriced shares. Second, institutions become more willing to bid aggressively as premarket interest increases. Third, institutional incentive to submit aggressive bids is positively related to underwriter pricing discretion. Fourth, bidding strategies are conditional on the different degrees of pricing discretion. Overall, this study's evidence concludes the endogeneity of institutional bidding decisions in premarket auctions.

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