Underpricing in a developing capital market: Australian equity issuances, 1920–39†. (11th April 2021)

• Record Type: Journal Article
• Authors: Fleming, Grant; Liu, Zhangxin (Frank); Merrett, David; Ville, Simon
• Is Part Of: Economic history review. Volume 74:Number 3(2021)
• Page Start: 831
• Page End: 855
• Publication Date: 2021-04-11
• Subjects: Economic history -- Periodicals; Great Britain -- Economic conditions -- Periodicals; 330.9
• DOI: 10.1111/ehr.13054
• Languages: English
• ISSNs: 0013-0117

Abstract

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.