Pre-IPO information and IPO valuation accuracy: the moderating role of book-building

The main objectives of this thesis are to investigate the valuation accuracy of initial public offerings (IPOs) using multiple methods (price-to-earnings, price-to-book, and price-to-sales) and the determinants of IPO valuation in Malaysia. The emphasis on IPO valuation accuracy is motivated by the...

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Main Author:	Ong, Chui Zi
Format:	Thesis
Language:	eng eng eng
Published:	2021
Subjects:	HG Finance
Online Access:	https://etd.uum.edu.my/10329/1/depositpermission-not%20allow_s902302.pdf https://etd.uum.edu.my/10329/2/s902302_01.pdf https://etd.uum.edu.my/10329/3/s902302_02.pdf
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id	my-uum-etd.10329
record_format	uketd_dc
spelling	my-uum-etd.103292023-03-01T04:03:37Z Pre-IPO information and IPO valuation accuracy: the moderating role of book-building 2021 Ong, Chui Zi Mohd-Rashid, Rasidah Taufil-Mohd, Kamarun Nisham School of Economics, Finance & Banking School of Economics, Finance & Banking HG Finance The main objectives of this thesis are to investigate the valuation accuracy of initial public offerings (IPOs) using multiple methods (price-to-earnings, price-to-book, and price-to-sales) and the determinants of IPO valuation in Malaysia. The emphasis on IPO valuation accuracy is motivated by the lack of information on firms’ valuation after the regulation on price-to-earnings was abolished in 1996. This study examines 458 IPOs listed throughout 2000-2017 and found that that the price-to-sales method provides the most accurate valuation of firms, specifically for firms with high growth rates, high or low debts, and/or inconsistent earnings in consecutive years. Price-to-sales is then applied to the IPO valuation ratio measurement, which is estimated using multiple regression model based on pre-IPO information in prospectuses, namely disclosure regulation of earnings forecasts, underwriter reputation, institutional investor’s ownership, growth opportunity, retail investor’s ownership, and pricing mechanism. This study finds that the regulatory change in earnings forecasts disclosure from mandatory to voluntary and greater allocation to retail investors have negative impacts on IPO valuation. Meanwhile, higher allocations of shares to institutional investors and the book-building mechanism lead to positive impacts on IPO valuation. This study also analyses the moderating effect of pricing mechanism on the determinants of IPO valuation, and finds that book-built IPOs certified by prestigious underwriters are highly valued. The findings of this study suggest that underwriters should employ at least the price-to-sales method as it could reduce mis-valuation of IPOs. Managers should be aware of the findings to ensure that they recognise the importance of disclosing these indicators in prospectuses to boost their firms’ values. Regulators, such as the Securities Commission, could enhance the current regulation by re-imposing the disclosure requirement regarding earnings forecasts and incorporating new listing rules for the book-building mechanism. 2021 Thesis https://etd.uum.edu.my/10329/ https://etd.uum.edu.my/10329/1/depositpermission-not%20allow_s902302.pdf text eng staffonly https://etd.uum.edu.my/10329/2/s902302_01.pdf text eng 2024-10-21 staffonly https://etd.uum.edu.my/10329/3/s902302_02.pdf text eng staffonly other doctoral Universiti Utara Malaysia
institution	Universiti Utara Malaysia
collection	UUM ETD
language	eng eng eng
advisor	Mohd-Rashid, Rasidah Taufil-Mohd, Kamarun Nisham
topic	HG Finance
spellingShingle	HG Finance Ong, Chui Zi Pre-IPO information and IPO valuation accuracy: the moderating role of book-building
description	The main objectives of this thesis are to investigate the valuation accuracy of initial public offerings (IPOs) using multiple methods (price-to-earnings, price-to-book, and price-to-sales) and the determinants of IPO valuation in Malaysia. The emphasis on IPO valuation accuracy is motivated by the lack of information on firms’ valuation after the regulation on price-to-earnings was abolished in 1996. This study examines 458 IPOs listed throughout 2000-2017 and found that that the price-to-sales method provides the most accurate valuation of firms, specifically for firms with high growth rates, high or low debts, and/or inconsistent earnings in consecutive years. Price-to-sales is then applied to the IPO valuation ratio measurement, which is estimated using multiple regression model based on pre-IPO information in prospectuses, namely disclosure regulation of earnings forecasts, underwriter reputation, institutional investor’s ownership, growth opportunity, retail investor’s ownership, and pricing mechanism. This study finds that the regulatory change in earnings forecasts disclosure from mandatory to voluntary and greater allocation to retail investors have negative impacts on IPO valuation. Meanwhile, higher allocations of shares to institutional investors and the book-building mechanism lead to positive impacts on IPO valuation. This study also analyses the moderating effect of pricing mechanism on the determinants of IPO valuation, and finds that book-built IPOs certified by prestigious underwriters are highly valued. The findings of this study suggest that underwriters should employ at least the price-to-sales method as it could reduce mis-valuation of IPOs. Managers should be aware of the findings to ensure that they recognise the importance of disclosing these indicators in prospectuses to boost their firms’ values. Regulators, such as the Securities Commission, could enhance the current regulation by re-imposing the disclosure requirement regarding earnings forecasts and incorporating new listing rules for the book-building mechanism.
format	Thesis
qualification_name	other
qualification_level	Doctorate
author	Ong, Chui Zi
author_facet	Ong, Chui Zi
author_sort	Ong, Chui Zi
title	Pre-IPO information and IPO valuation accuracy: the moderating role of book-building
title_short	Pre-IPO information and IPO valuation accuracy: the moderating role of book-building
title_full	Pre-IPO information and IPO valuation accuracy: the moderating role of book-building
title_fullStr	Pre-IPO information and IPO valuation accuracy: the moderating role of book-building
title_full_unstemmed	Pre-IPO information and IPO valuation accuracy: the moderating role of book-building
title_sort	pre-ipo information and ipo valuation accuracy: the moderating role of book-building
granting_institution	Universiti Utara Malaysia
granting_department	School of Economics, Finance & Banking
publishDate	2021
url	https://etd.uum.edu.my/10329/1/depositpermission-not%20allow_s902302.pdf https://etd.uum.edu.my/10329/2/s902302_01.pdf https://etd.uum.edu.my/10329/3/s902302_02.pdf
_version_	1776103792398303232

Pre-IPO information and IPO valuation accuracy: the moderating role of book-building

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