Average Returns to Small and Large Investors in Singapore Initial Public Offerings

Abstract

A number of explanations have been advanced for the sizable rates of return experienced public offerings (IPO's) in the first few days or weeks of listing.! Baron (1982), . and Beatty and Ritter (1986) suggest that underpricing is the result of a to uninformed investors caused by asymmetric information. Allen and Faulhaber Grinblatt and Hwang (1989), Welch (1989), and Chemmanur (1993) argue. that esi information causes high quality firms to signal their quality by underpricing, expect to raise capital under betier terms in the future. Ibbotson (1975) and ) claim that underpricing results because issuing firms desire to avoid lawsuits. and Shaw (1993) find evidence supporting the winner's curse explanation for ing and reject the signalling explanation in their comparison of master limited ip PO's and regular PO's? Koh, Lim, and Chin (1992) support the signalling of Grinblatt and Hwang in their study of Singapore TPO's from June 1975 Base 1957.