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Title: An empirical analysis of pricing and structure of new issues in Korea and the UK
Author: Lee , Ki - Hwan
Awarding Body: University of Manchester
Current Institution: University of Manchester
Date of Award: 1993
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The main objective of this thesis is to investigate the explanations of the short-run underpricing of initial public offerings in the UK and Korea from the viewpoints of signalling, certification and winner's curse theories. The short-run and long-run performance of initial public offerings (IPOs) will also be examined. We document the underpricing of IPOs in both the UK and Korean markets. However, the long-run performance shows a different pattern in each market The British IPOs were overpriced in the long-term but Korean IPOs showed persistent positive returns even in the long-run. The British privatisation IPOs also showed positive returns in the long-term. The contrast of the long-run and short-run performance could be explained in terms of overreaction hypothesis or theory of fads. Based on signalling hypothesis, we explored the relation between the value of issuing firm and entrepreneurial ownership, the association between firm value and underpricing, and the relationship between underpricing and inside ownership. Our empirical findings using the UK IPOs data showed positive relations consistent with the prediction of signalling models. In contrast, the relation between underpricing and firm value appears to be uncertain in Korea. In the UK IPOs market, certification or reputation hypothesis; i.e. that the selection of professional advisers can signal to outside investors information about future value of issuing firms, was confirmed by testing the relation between quality of advisers, firm value, underpricing and risk. However, we failed to explain the underpricing of Korean new issues from this perspective. We attempted to reconcile the underpricing of 1P0s with Rock's winner's curse model. The underpricing of British ordinary lPOs cannot be fully explained by Rock's model. On the other hand, the underpricing of British privatisation IPOs and Korean regular IPOs could guarantee t.h e risk free rate of return to the uninformed investors . This evidence is consistent with Rock's winner's curse model.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available