Issuer-oriented underpricing costs in initial public offers: Evidence from Hong Kong

This paper estimates the underpricing cost associated with new shares issued and sold when firms go public in a traditional British-style IPO market in contrast to prior work which focussed on the underpricing cost to pre-IPO investors. Secondly, the estimates account for interest income on application funds received by issuing firms. Using data from the Hong Kong IPO market, the results show that the issuer underpricing cost of new share issues is on average only 14% of headline underpricing. When interest on application funds is taken into account, net issuer underpricing cost reduces to just around 7% of headline underpricing. This finding provides a compelling explanation of why issuing companies may not be concerned about underpricing in traditional British-style IPO markets. Thirdly, we also find that pre-IPO investors take steps to minimise wealth transfer to new investors either by selling a very small proportion or none of their pre-IPO shares. These findings suggest that explanations of IPO underpricing to the various parties involved in the process should, in part, be sought in the institutional structures and investment banking practices of the relevant primary capital market.     

中韩信用卡相关法律关系与挂失风险承担之比较

中韩两国信用卡业务都始于二十世纪六、七十年代，但因中国信用卡业务比较单一，而且法律法规不完善，所以同韩国的信用卡业务相比较就非常落后。韩国信用卡业务的当事人只有发卡机构、持卡人和特约商户，而中国却还有担保人。在信用卡挂失后的风险承担问题方面，韩国采取的是发卡机构承担主义，而中国采取的却是持卡人承担主义。通过对中韩信用卡法律问题的比较分析，可为中国制定完善的信用卡法律法规提供可借鉴的经验。     

Catastrophe bond pricing in the primary market: The issuer effect and pricing factors

COVID pandemic has highlighted the importance of hedging against catastrophic events, for which the catastrophe bond market plays a critical role. Our paper develops a two-level modelling and uses a unique, hand-collected dataset, which is one of the largest and most detailed datasets to date containing: 101 different issuers, 794 different bonds, spanning 1997–2020. We identify issuer effects robustly, isolating them from bond specific pricing effects, therefore providing more credible pricing factor results. We find that bond pricing and volatility are heavily impacted by the issuer, causing 26% of total price variation. We also identify specific issuer characteristics that significantly impact bond pricing and volatility, such as the issuer’s line of business accounting for up to 36% of total price variation. We further find that issuer effects are significant over different market cycles and time periods, causing substantial price variation. The size and content of our data also enables us to identify the counter-intuitive relation between bond premiums and maturity, and bond premiums and hybrid bond triggers.     

The role of asset payouts in the estimation of default barriers

In the barrier option model of corporate security valuation, the firm’s creditors impose a default-triggering barrier on the firm value to protect their claim. Two disputed issues in the literature are whether the implied default barrier is positive, and whether it is above or below the book value of the firm’s liabilities. We extend the model of Brockman and Turtle (2003) by embedding asset payouts in the valuation of shareholders’ equity. Using a sample of US stocks from the NYSE, AMEX, and NASDAQ exchanges, our paper exploits market and firm information to compute the implied default barrier for thirty 2-digit SIC groups, including industrials and banks. Our results show that the implied default barrier is lower than it is in the received literature, and it can be less than total liabilities, even zero for some firms. The implied physical default probabilities are significantly lower in the presence of payouts, providing a closer fit to the historical corporate default rates, particularly for issuers of speculative-grade bonds.