- Log In/Sign Up
- E-ISSN2233-5382
- KCI
E-ISSN : 2233-5382
Do Conflicts in the Interest of a Securities Firm Running Asset Management Businesses Effect an IPO Underpricing?
Abstract
Purpose: This paper examines whether or not universal banking operating in the asset management business tend to IPO underpricing when they are hosting IPOs in favor of their private interests. Previous studies suggest evidence which indicates that the universal banking operating in the asset management business tend to underestimate offering prices. This paper compares and analyzes the data before and after June 2007 to examine the influence of put-back option on IPO underpricing. Research design, data, and methodology: This paper compares the underwritten prices of IPOs of universal banking with and without asset management business in Korea in order to test such tendency actually exists. Result: We can find that such tendency is not correlated with first-day stock returns but correlated with put-back options. Our paper concludes that the hypothesis that "the universal banking's subsidiary asset management business influences the IPO underpricing" is found to be statistically insignificant. Conclusion: According to our analysis, it cannot be concluded that the interests of operating asset management do not conflict with the ones of underwriting business. However, it is so possible that the asset management companies try to harm the customers' interests, for instances churning and stuffing, it is necessary to scrutinize their behaviors and review the related regulations.
- keywords
- IPO Underpricing, Conflicts in the Interest of a Securities, IPO Puzzle
Reference
Arikan, A. M., & L. Capron (2010). Do Newly Public Acquirers Benefit or Suffer from their pre-IPO Affiliations with Underwriters and VCs? Strategic Management Journal, 31, 1257–1289.
Batnini, F. & Hammami, M. (2015). IPO Waves: How Market Performances Influence The Market Timing of IPO?. Journal of Applied Business Research, 31(5), 1679-1692.
Ber, H., Yafeh, Y., & Yosha, O. (2001). Conflict of Interest in Universal Banking: Bank Lending, Stock Underwriting, and Fund Management. Journal of Monetary Economics, 47(1), 189–218.
Carter, R. B., & Manaster, S. (1990). Initial Public Offerings and Underwriter Reputation. Journal of Finance, 45(4), 1045–1067.
Choi, M. S. (1999). A Study on The Price Discount and Initial Performance of IPO Stocks. Asian Review of Financial Research, 12(1), 197–226.
Choi, M. S. (2005). Pre-issue Information Gathering Activities of The Book Building Process and The Partial Adjustment Hypothesis in The Korean IPO Market. Asian Review of Financial Research, 34(3), 1–36.
Choi, M. S. (2006). An Empirical Study on the Effects of Bundling and Information Spillover from the KOSDAQ Primary and Secondary Markets. Asian Review of Financial Research, 19(2), 39–72.
Choi, S. H. & Choi, J. H. (2018). Determinants of Initial Public Offering Firms : Focused on the Firms Applying for Listing Eligibility Review. Korean Accounting Review, 27(6), 61-94.
Chemmanur, T. J. & J. He (2011). IPO Waves, Pproduct Market Cmpetition, and The Going Public Decision: Theory and Evidence. Journal of Financial Economics, 101(2), 382-412.
Chod, J. & E. Lyandres (2011). Strategic IPOs and Product Market Competition. Journal of Financial Economics, 100, 45–67.
Green, T. C. & Hwang, B. (2011). Initial Public Offering as Lotteries: Skewness Preference and First-Day Return. Management Science, 58(2), 432-444.
Ibbotson, J., & Miller, R. (1988). Investment Banker Prestige and The Underpricing of Initial Public Offerings. Financial Management,17(2), 19–29.
Kang, H. S. (1990). A Study on Pricing of Offering Stock in IPO. Asian Review of Financial Research, 3(1), 157–176.
Kim, S. M., & Lee, S. H. (2006). Underpricing of IPOs and Underwriters’ Market Making Activities. Asia Pacific Journal of Financial Studies, 35(3), 141–174.
Kim, S. M., & Khil, J. U. (2001). How to Determine The Offer Prices of IPO Issues in The KOSDAQ market?—Concentrated on The Book Building System. Asian Review of Financial Research, 28(1), 181–212.
Klein, P. G & Zoeller, K. (2001). Universal-Bank Underwriting and Conflicts of Interest: Evidence from German Initial Public Offerings. Working Paper.
Lee, K. H., & Yi, M. C. (2003). Articles:Underpricing of IPOs on KOSDAQ versus KSE. Korean Journal of Financial Management, 20(1), 233–260.
Lee, H. I. & Choi, S. H. (2014). Earnings Management of Initial Public Offerings: Evidence from Venture Capital-Backed Firms. Korean Accounting Review, 39(3), 179-213.
Lee, K. Y. & Shin H. H. (2019). An Empirical Analysis of Corporate Performance According to Existence and Types of Venture Capital. Asia-Pacific journal of business and venturing, 14(2).
Oh, S. K & Han, H. H. (2014). The Short and Long-Term Performance of Venture-Backed IPO Kosdaq Firms and the Roles of Venture Capitals in Korea. Asian Review of Financial Research, 27(3), 357-391.
Park, R. S., & Shin, B. S. (2007). Conflicts of Interest among Securities Firms Running Asset Management Businesses. Asian Review of Financial Research, 20(3), 127–153.
Park, J. (2017). Trading Behavior of Individual Investors and IPO Stock Performance. Journal of Industrial Economics and Business, 30(1), 83-103.
Ritter, J. R. (1984). Signaling and Valuation of Unseasoned New Issues: A Comment. Journal of Finance, 39(4), 1231–1237.
Ritter, J. R., & Welch, I. (2002). A Review of IPO Activity, Pricing, and Allocations. Journal of Finance, 57(4), 1795–1828.
Rock, K. (1986). Why New Issues Are Underpriced. Journal of Financial Economics, 15(1–2), 187–212.
Tiniç, S. M. (1988). Anatomy of Initial Public Offerings of Common Stock. Journal of Finance, 43(4), 789–822.
Won, J. H. & Kim, K. H. (2007). The Full Revision of Underwriting Rules and Its Impact on IPO Underpricing. Korean Journal of Business Administration, 20(2), 739–770
- Downloaded
- Viewed
- 0KCI Citations
- 0WOS Citations