An examination of factors that account for differences in the degree of IPO underpricing between China and South Korea : a case for high technology sector

Abstract

This paper examines the factors for IPO underpricing phenomenon in China and South Korea over the period 2010 to 2014. This paper uses the IPO samples extracted from the technology sector and the sample consists of 164 IPO issues covering the period 2010 and 2014 in these two countries. Besides, the paper examines the relationship between these factors and the degree of IPO underpricing for Chinese and South Korea technology companies.The paper finds that offer price, D/E ratio and pre-tax income per share play an important role in explaining IPO underpricing for technology sector in China and South Korea. The results confirm that issue size and offer timing has an insignificant effect on initial return.