BUBBLE IPO UNDERPRICING: EVIDENCE FROM JAPAN

Berna KIRKULAK (Hokkaido University )

This paper empirically examines the determinants of increase in the underpricing of Japanese initial public offerings(IPOs).I study the first-day return of Japanese IPOs during 1997-2001.Substantial underpricing varies year to year, across industries and Pre-IPO information of the firms. I find evidence of bubble IPO underpricing especially during 1999-2000 in Japan. My finding is consistent with Loughran and Ritter(2001)who analyzed American IPO's and figured out that there was also a bubble underpricing in U.S.A during 1999-2000. In this paper, I also argue that issuers enjoy money left on the table as underpricing increases.