An analysis of initial returns of the initial public offerings issued from 1994-2005 based on the category of their lead underwriters: An update

• Main Authors: Arevalo, Karen Joy, Garde, Alessandro, Hernandez, Romulo, Rufuerzo, Julian Jose
• Format: text
• Language: English
• Published: Animo Repository 2006
• Subjects: Going public (Securities); Finance and Financial Management
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/18434
• Institution: De La Salle University

An initial public offering (IPO) is the first sale of a corporation's common shares to public investors. The main purpose of an IPO is to raise capital for the corporation. While IPOs are effective at raising capital, they also impose heavy legal compliance and reporting requirements. The term only refers to the first public issuance of a company's shares any later public issuance of shares is referred to as a secondary market offering. The first general requirement for a company to be publicly listed in the Philippine Stock Exchange is to undergo the process of underwriting. Underwriting is the process or act of guaranteeing the sale of distribution of shares by purchasing them from an issuing firm at a stated price and take on the risk of distributing the securities. The IPOs were perceived to produce abnormal return on its initial trading day. Abnormal return is the excess of the IPO return from the Phisix return. The presence of abnormal return are said to be caused by underpricing. A study was made and made a theory that the presence of abnormal return is affected by the assets of the underwriter of the IPO. This paper will update the same study and look if there really is a relationship between the presence of abnormal return and the asset of the underwriter. In addition, this paper will also test whether the market capitallization of the issuing company helps produce abnormal returns for the IPOs and if the IPO market do follow a cycle of dramatic swings, often referred to as hot and cold markets.