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Underpricing in a developing capital market: Australian equity issuances, 1920¿39¿

Journal Article


Abstract


  • Developing capital markets generally lack the regulatory safeguards and rich informational sources that assist investors in judging new equity issues in modern markets. Focusing on the early stage capital market in interwar Australia, we calculate the success (underpricing and percentage raised) of 786 new equity issues, comparing initial public offerings, seasoned equity offerings, and rights issues. We examine whether the use of underwriters and the choice of security (ordinary or preference shares) affected the success of the equity issue. We find that certification by underwriters had no effect on capital-raising success once we controlled for firm-specific factors in the multivariate regressions, while underpricing and percentage raised varied by type of shares offered to investors.

Publication Date


  • 2021

Citation


  • Fleming, G., Liu, Z., Merrett, D., & Ville, S. (2021). Underpricing in a developing capital market: Australian equity issuances, 1920¿39¿. Economic History Review, 74(3), 831-855. doi:10.1111/ehr.13054

Scopus Eid


  • 2-s2.0-85104243723

Start Page


  • 831

End Page


  • 855

Volume


  • 74

Issue


  • 3

Abstract


  • Developing capital markets generally lack the regulatory safeguards and rich informational sources that assist investors in judging new equity issues in modern markets. Focusing on the early stage capital market in interwar Australia, we calculate the success (underpricing and percentage raised) of 786 new equity issues, comparing initial public offerings, seasoned equity offerings, and rights issues. We examine whether the use of underwriters and the choice of security (ordinary or preference shares) affected the success of the equity issue. We find that certification by underwriters had no effect on capital-raising success once we controlled for firm-specific factors in the multivariate regressions, while underpricing and percentage raised varied by type of shares offered to investors.

Publication Date


  • 2021

Citation


  • Fleming, G., Liu, Z., Merrett, D., & Ville, S. (2021). Underpricing in a developing capital market: Australian equity issuances, 1920¿39¿. Economic History Review, 74(3), 831-855. doi:10.1111/ehr.13054

Scopus Eid


  • 2-s2.0-85104243723

Start Page


  • 831

End Page


  • 855

Volume


  • 74

Issue


  • 3