IPO underpricing and mutual fund allocation: New evidence from registration system
International Review of Financial Analysis
; : 102405, 2022.
Article
in English
| ScienceDirect | ID: covidwho-2083224
ABSTRACT
We study the effect of mutual fund allocation on China's IPO market under the new registration system. The introduction of mutual fund bids significantly increases the IPO offer price, resulting in a low initial short-term return and suppressed IPO underpricing. Those newly listed stocks witness lower volatility in the following weeks due to preferential allocation to the mutual fund at the primary market. Further analysis suggests that large investors' net purchase strengthens IPO after-market return and volatility. Besides, the effect of mutual fund participation on IPOs is stronger in places where the COVID-19 outbreak. This new evidence suggests that mutual fund allocation plays a critical role in IPO price discovery and decreases investor lottery trading.
Full text:
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Collection:
Databases of international organizations
Database:
ScienceDirect
Language:
English
Journal:
International Review of Financial Analysis
Year:
2022
Document Type:
Article
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