Skip to main content

Signalling by underwriter retention rate in the IPO market

Buy Article:

$53.17 plus tax (Refund Policy)


Underwriters in Taiwan have to purchase 10-25% of shares offered in initial public offerings (IPOs) for their own accounts. We present a signalling model showing that the underwriter retention rate can serve as a signal of firm value to investors because underwriters are investors as well. This mechanism can reduce information asymmetry between issuers and investors. The model shows that when underwriters retain more proportion of IPO shares, in equilibrium, the initial return is greater and the subscription success rate is lower. We further test the propositions using 616 IPO firms in Taiwan for the period 1998-2004. Overall, the empirical results support the propositions developed from the signalling model.

Document Type: Research Article


Affiliations: 1: Department of Finance, Yuan Ze University, 320 Chungli, Taiwan,Anderson School of Management, University of New Mexico, Albuquerque, NM 87131, USA 2: Graduate Institute of Finance, Fu-Jen Catholic University, 242 Hsinchuang, Taiwan 3: Department of Finance, Ching-Yun University, 320 Chungli, Taiwan

Publication date: 2007-08-01

More about this publication?
  • Access Key
  • Free ContentFree content
  • Partial Free ContentPartial Free content
  • New ContentNew content
  • Open Access ContentOpen access content
  • Partial Open Access ContentPartial Open access content
  • Subscribed ContentSubscribed content
  • Partial Subscribed ContentPartial Subscribed content
  • Free Trial ContentFree trial content
Cookie Policy
Cookie Policy
Ingenta Connect website makes use of cookies so as to keep track of data that you have filled in. I am Happy with this Find out more