The underpricing of IPOs on the Stock Exchange of Mauritius

This paper investigates the underpricing of IPOs on the Stock Exchange of Mauritius (SEM). Taking into account the whole population of firms which went public since the inception of the SEM until 2010, the results show an average degree of underpricing within the range 10–20%. Using a regression approach, we demonstrate that the aftermarket risk level and auditor's reputation both have a significant positive impact on initial returns. We propose the use of the Z-score as a composite measure of a firm's ex ante financial strength, and find that it has a significant negative effect on the degree of short-run underpricing.     

Hot and cold merger markets

We study mergers and acquisition during the period from 1988 to 2005 and examine the impact of merger market intensity, i.e., merger waves, on the means of payment and the returns to target and acquirer shareholders. We use two proxies to measure the intensity of the merger market—the number of mergers in the trailing 12-month period prior to a merger and the total dollar volume of mergers in the trailing 12-month period prior to a merger—and use these measures to define hot and cold merger markets. We find that stock financing is more common after a stock price run-up for the acquiring firm and in hot merger markets. We also find that the acquisition premium is larger in hot merger markets. Returns to acquiring company shareholders are lower for stock financed mergers and are lower when merger markets are intense. Our results are consistent with the predictions of the behavioral theory for merger waves.     

Stealth trading: The case of the Tokyo Stock Exchange

The stealth trading hypothesis asserts that informed traders trade strategically by breaking up their orders so as to more easily hide among the liquidity traders. Using data for the Tokyo Stock Exchange (TSE), a pure order-driven market, we find evidence that price changes are driven by small- and medium-size trades, with small trades making the greatest contribution to price change relative to their contribution to trading volume. We also find that large trades explain a greater portion of the cumulative price change on high volatility days. Hence, our results support the stealth trading hypothesis for the TSE.     

Stock exchange demutualization,self-listing and performance: The case of the Australian Stock Exchange

This paper examines the effects of the recent spate of financial exchange mutual-to-stock conversion phenomenon on the performance of listed exchanges and the quality of the stock market using the Australian Stock Exchange (ASX) as a case study. We find that the ASX stock significantly outperformed the stock index and the control group on a market-adjusted return basis. The stock market performance is driven by strong operating performance. The profitability ratios of the ASX have significantly improved in the five years following the demutualization and self-listing. The performance improvements remain significant even after controlling for growth in the Australian economy. From a market quality perspective, we document evidence of increased trading activity by foreign investors after ASX’s demutualization and self-listing. Interestingly, we also find that bid-ask spreads of the stock market have narrowed in the post-conversion period. In particular, small-cap firms have become more liquid. The results show that stock exchange conversion from mutual to publicly traded exchange is not only value enhancing for the exchange and its shareholders, but it is also beneficial for the stock market as a whole.     

The accuracy of earnings forecasts in IPO prospectuses on the Kuala Lumpur Stock Exchange

This paper examines the accuracy of earnings forecasts made by managers of Malaysian initial public offerings (IPOs) during the period 1984–1995. It is a mandatory requirement for Malaysian IPOs to furnish earnings forecasts together with the opinions thereon of the auditors and the lead underwriter in their prospectuses. Their accuracy is measured by forecast errors, absolute forecast errors, squared forecast errors and standardised forecast errors. The results suggest that, on average, managers under-forecast earnings by 33.37%. A comparison with the naive no change model in earnings suggests that 96 out of 122 companies outperform this model. A number of company specific characteristics (size, age, forecast interval, gearing, proportion of shares retained by owners, auditor reputation and industry) are tested. The results reveal that both the age and industry classification of the company are statistically significant, and that management earnings forecasts are particularly inaccurate where firms experience a decline in earnings. Key words: accuracy of prospectus earnings forecasts, initial public offerings, accounting in Malaysia.     

The impact of reputation on analysts’ conflicts of interest: Hot versus cold markets

During periods of high IPO underpricing, unaffiliated all-star analysts from high reputation banks issue fewer strong-buy recommendations while unaffiliated all-star analysts from low reputation banks do not change their level of optimism. In contrast, unaffiliated non-star analysts from both high and low reputation banks issue more strong-buy recommendations. Consistent with the results on analyst optimism, the market reacts more favorably to strong-buy recommendations by unaffiliated all-star analysts from high reputation banks than other unaffiliated analysts during high IPO underpricing periods. Finally, we find that unaffiliated non-star analysts from low reputation banks reduce their coverage following an SEO if they are not selected as a part of the managing syndicate. Collectively, our results indicate that during periods of high IPO underpricing unaffiliated analysts face conflicts of interest, but personal-level reputation, and to a lesser extent bank-level reputation, plays a role in reducing this bias.     

Risk disclosures on the second tier markets of the London Stock Exchange

The identification, management and disclosure of risks have been the subject of recent legislation, directives and reporting standards issued across a number of international jurisdictions. To inform the disclosure debate, this paper provides a detailed analysis of the risk warning disclosures of initial public offering (IPO) companies and the factors that drive such disclosures. We find that risk disclosures of IPO companies contain a greater proportion of forward‐looking information but a lower proportion of information on internal controls and risk management than the disclosures of listed companies. We find evidence that such disclosure has increased across time but that larger directors’ shareholdings are associated with a reduction in risk disclosure.     

The valuation effects of overseas listings: The case of the Tokyo Stock Exchange

Shareholders of U.S. firms that listed stock on the Tokyo Stock Exchange from 1973 to 1989 are shown to have experienced no significant wealth gains. The pattern of the market's reaction to a Tokyo listing tracks closely the reactions to a domestic listing, where gains prior to listing are later erased. The findings indicate no advantages to a listing for a firm with a prior business presence in Japan, and they do not support the hypothesis of diminishing returns to foreign listings. The findings are consistent with the integration of international capital markets.     

Explaining underpricing of IPOs in frontier markets: Evidence from the Nigeria Stock Exchange

The paper provides empirical analyses of IPO underpricing on the Nigerian Stock Exchange, from the period 1990 to 2006. The results indicate an average abnormal initial day returns of 43.1%. There is evidence of long-run underperformance of 0.6%. Results from our regression model explaining initial abnormal returns for the IPOs of Nigeria show that size of firm and audit quality are important variables affecting underpricing. The results also show the presence of a non-linear relationship between the offer price and underpricing.     

Dynamic volatility and external security related shocks: The case of the Athens Stock Exchange

This paper analyses the impact of exogenous national security related shocks on the time-varying volatility structure of the Greek stock market. Alternative autoregressive conditional heteroscedastic models are estimated, in order to identify the best fit that adequately describes return volatility behavior, testing symmetric as well as asymmetric innovation responses. An external national security related shock factor is included as well as a military crisis dummy, in order to depict possible implications for the conditional variance. The empirical findings appear to support a statistically significant impact of both national security related factors on the Athens stock market returns.     

Strategic waiting in the IPO markets

The paper analyzes the strategic waiting tendencies of IPO firms. Our game theoretic model shows why some high-quality firms may strategically delay their initial public offering until a favorable signal about the economic conditions is generated by other issuing firms. Survival analysis suggests that IPOs in the highest quality decile have significantly higher median waiting days (since the start of a rising IPO cycle) than the IPOs in the lowest decile. During the early stages of an expanding IPO cycle the average firm quality is lower than in its later stages. We find supporting evidence also from the IPOs of future S&P 500 firms.     

Stock returns,trading volume,and volatility: The case of African stock markets

The presence of the African Stock Markets (ASMs) in the global frontier markets indices confirms their global portfolio diversification role. This study investigates the asymmetric and intertemporal causality among the stock returns, trading volume, and volatility of eight ASMs. Results based on the linear model reveal that return generally Granger cause trading volume. However, evidence from the quantile regression shows that lagged trading volume has a negative causal effect on returns at low quantiles and positive causal effects at high quantiles. This evidence is consistent with volume-return equilibrium models, disposition and overconfidence models, and information asymmetry models. The positive causal effects of volatility on volume support the dispersion of beliefs model. In contrast, intertemporal evidence of contemporaneous and lagged causal relationships from trading volume to volatility supports the mixture of distribution hypothesis, sequential information acquisition hypothesis, and dynamic efficient market hypothesis. Volume-return and return-volume causality dynamics are quantile-specific and therefore driven by market conditions. However, the volume-volatility causality is dependent on volatility regimes. The linear model results confirm how model misspecification can distort and even reverse empirical evidence relative to nonlinear models.     

证券交易所的可竞争性与我国证交所的发展

在技术与制度激变的全球化时代,证券交易所越来越成为了金融业中的竞争实体,21世纪初全球证交所大范围的整合并购,要求我们对于证券交易所的定位与发展应该有新的认识。本文从证交所在市场的中可竞争性出发,探讨我国证券交易所的未来发展。     

Non-linear dynamics of hot and cold cycles in Indian IPO markets: evidence from Markov regime-switching vector autoregressive model

The study aims to examine non-linear relationship between initial public offering (IPO) volume and average monthly initial returns for ‘hot’ and ‘cold’ issuing cycles in the Indian IPO markets using a two-state Markov regime-switching vector autoregressive model. The sample considers 557 IPOs during the period 2004–2014. The study establishes the presence of hot and cold states in Indian IPO markets. It finds bidirectional causality between IPO volume and initial returns for ‘hot’ issuing periods. The empirical findings suggest that the market possesses valuable information content in terms of the past issuing activity which has the potential to increase the predictability of future market behaviour.     

基于深市上市公司IPO盈余管理实证研究

在分析IPO盈余管理动机的基础上,研究了IPO公司进行盈余管理的手段及其影响。以2008年在深圳证券交易所上市的71家公司为对象,通过研究其2006-2010五年的经济数据,运用改进后的Jones模型,得出两个结论：上市公司的业绩在IPO前后存在明显的差异,并且上市前两年的业绩高于IPO当年及IPO后两年;上市公司通过调整应计利润进行盈余的操纵。最后针对分析结果提出相应对策,以期对加强证券市场监管,完善公司治理结构,帮助投资者进行投资决策做出贡献。     

The Equilibrium Exchange Rate of Mauritius: Evidence from Two Structural Models

In this paper we assess the equilibrium value of the Mauritian rupee in 2006-7 and over the medium run using two structural models. First, we derive a current account-based measure of the exchange rate equilibrium using the macroeconomic balance approach. Second, we estimate a reduced-form fundamental equilibrium exchange rate measure. Our results, which are robust to an alternative non-econometric approach, suggest that the Mauritian rupee was aligned with its equilibrium value in 2006-7 and little adjustment appeared necessary over the medium run.     

Noise trading in small markets: Evidence from Amman Stock Exchange (ASE)

This study aims to analyze the behavior of traders in Amman Stock Exchange (ASE):-firstly at the market level by analyzing the market return volatility, defining the time frame of this volatility, and classifying it as transitory volatility or a permanent volatility, Daily closing of Amman free float market index will be used to indicate the market return during the period from 1/1/1992 to 31/12/2015 where 5899 observations were obtained. Secondly at the firms level by selecting a sample of trading companies and interpreting the results through analyzing some important features of the companies, such as share price and ownership structure, Daily closing of share price of the selected companies will be used to indicate the return during the period from 1/1/2015 to 31/12/2015 where 240 observations were obtained for each company during this period.To achieve the goals of this study, the Variance ratio test, GARCH test, and CGARCH test will be used. The study highlighted an important result that the common culture of traders on ASE was Noise Trading; the significance of this finding was statistically proven at the confidence level of 1%.This study recommends the competent authorities to enact a slew of strict measures: the implementation of Capital Gains Tax in a bid to slash frequent selloffs and purchasing of noise traders and increasing the commission of brokers in return for completing selloffs and purchasing deals. The study also affirmed the necessity of intervening periodically to raise awareness of the negative impact of speculation including the instability, increasing the firm’s cost of capital and the damage to traders’ confidence in the stock markets.     

The Stock Price-Volume Linkage on the Toronto Stock Exchange: Before and After Automation

This paper investigates the information content of trading volume on the Toronto Stock Exchange before and after the move towards fully electronic trading. It is argued that if price discovery improves under electronic trading, the predictive power of volume should be less significant. The empirical analysis supports more accurate price discovery under electronic trading. Results from both the structural and vector autoregression models indicate that the predictive power of volume for price variability disappears after full automation.