The impact of the costs of subscription on measured IPO returns: The case of Asia

Joseph K W FUNG, Louis T.W. Cheng, Kam C. Chan*

*Corresponding author for this work

    Research output: Contribution to journalJournal articlepeer-review

    20 Citations (Scopus)

    Abstract

    Asian initial public offerings (IPOs) require investors to pay subscription funds up-front upon submission of applications, and these funds are locked-up for 1-3 weeks without interest. Hence, the IPO process entails an explicit financing cost (opportunity cost) whether investors borrow funds or use their own funds to apply for IPO shares. The IPO subscription costs are not trivial, especially in a high interest rate environment or when an IPO is highly oversubscribed. These costs should be considered in any comparison of IPO returns across countries.

    Original languageEnglish
    Pages (from-to)459-465
    Number of pages7
    JournalJournal of Corporate Finance
    Volume10
    Issue number3
    DOIs
    Publication statusPublished - Jun 2004

    Scopus Subject Areas

    • Business and International Management
    • Finance
    • Economics and Econometrics
    • Strategy and Management

    User-Defined Keywords

    • Asian IPOs
    • Initial public offerings
    • Non-discretionary allocation

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