Mazouz, K, Mohamed, A, Saadouni, B et al. (1 more author) (2017) Underwriters' allocation with and without discretionary power: Evidence from the Hong Kong IPO market. International Review of Financial Analysis, 49. pp. 128-137. ISSN 1057-5219
Abstract
This study uses a unique and extensive data set from the Hong Kong IPO market to examine the theory of adverse selection under two distinct regulatory regimes in relation to underwriters' discretionary power in IPO share allocation. Consistent with Rock's (1986) theory of adverse selection in the IPO market, we show that, prior to the introduction of the clawback provision; retail (uninformed) investors were allocated more of the overpriced offerings and less of the underpriced issues. However, after the provision is implemented, retail investors have been allocated significantly more of the underpriced offerings and less of the overpriced ones. Overall, we find that allocation-adjusted initial returns for the retail investors are lower (higher) than the risk-free rate pre- (post-) clawback provision. These findings imply that the mandatory clawback provision has enhanced the fairness in IPO share allocations among different investor groups and has reduced the winner's curse in the IPO market.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | Crown Copyright © 2017 Published by Elsevier Inc. This is an author produced version of a paper published in International Review of Financial Analysis. Uploaded in accordance with the publisher's self-archiving policy. |
Keywords: | Mandatory clawback; Adverse selection; Allocation-adjusted returns |
Dates: |
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Institution: | The University of Leeds |
Academic Units: | The University of Leeds > Faculty of Business (Leeds) > Accounting & Finance Division (LUBS) (Leeds) |
Depositing User: | Symplectic Publications |
Date Deposited: | 21 Jun 2019 09:25 |
Last Modified: | 02 Jul 2019 10:23 |
Status: | Published |
Publisher: | Elsevier |
Identification Number: | 10.1016/j.irfa.2016.12.006 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:147576 |
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Licence: CC-BY-NC-ND 4.0