Bookbuilding, Price Revision and Initial Returns of IPOs



This study examines how public information, disclosed bookbuilding information, and private information is reflected in price revisions. Using a very unique hand-collected dataset for the IPOs in Korea from January 2000 to December 2007, we have found market returns and institutional investors’ demand for IPOs affect revision of offer prices. We find evidence that underwriters partially reflect private information in offer prices, especially positive idiosyncratic shocks not explained by market conditions or institutional investors’ subscription for IPO. Such asymmetric partial adjustment of private information in price revisions explains initial returns of IPOs. In addition, we also find that market making requirement does not affect the nature of partial adjustment of information. These results are robust even when we control for other characteristics of IPOs.


 1. The Offering Process and Bookbuilding Procedure in Korea
 2. Hypotheses on IPO offer price revision and initial returns
 3. Data
 4. Empirical Results
  1) Price revision
  2) Initial return
  3) Decomposition of price revision
 5. Robustness Tests
  1) Intervals of initial return
  2) Market making activity
 6. Summary and Conclusion


  • Sung Wook Joh
  • Yoo-Hwan Kim


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