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Issue Manager Reputation, Underpricing and Long-Run Performance of Initial Public Offerings:

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ISSUE MANAGER REPUTATION, UNDERPRICING LONGAND LONG-RUN PERFORMANCE OF INITIAL PUBLIC OFFERINGS: EVIDENCE FROM THE SINGAPORE IPO MARKET

VOON PEIJUN
(Bachelor of Business Administration (Hons), NUS)

A THESIS SUBMITTED
FOR THE DEGREE OF MASTERS OF SCIENCE (BUSINESS)

DEPART DEPARTMENT OF FINANCE AND ACCOUNTING NATIONAL UNIVERSITY OF SINGAPORE 2009

ACKNOWLEDGEMENT

I would like to express my warmest gratitude to Professor Michael Shih for his patient guidance and encouragement all this while. A very big thank you, Sir.

I would also like to take this opportunity to thank my family for their love and concern all these years. Thank you Dad, Mum and Brother. Without their support, I would not have come so far. Thank you!

Voon Peijun 2009

Page i

ABSTRACT
The study explores the role of issue managers in the initial public offering (IPO) process. Empirical research shows that IPOs are associated with two significant market anomalies: short-run underpricing puzzle and long-run underperformance phenomenon. This paper examines the reputational influence of issue managers on the two anomalies. Employing the newly developed ‘twelve-month rolling’ reputation ranking approach, our study is the first to furnish a comprehensive ranking of all the issue managers with a substantial presence in Singapore.

Based on a sample of 384 IPOs listed on the Singapore Exchange between January 1, 1997 and August 22, 2008, we find evidence of prevalent short-run underpricing and long-run underperformance in the domestic market. Our findings indicate that the IPOs backed by higher reputation issue managers are associated with greater short-run underpricing. This is consistent with the ‘market power hypothesis’ which postulates that higher reputation issue managers are able to generate greater market participation and higher market valuations in the immediate post-issue...

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