Type of Document Dissertation Author Chiu, Hsin-Hui Author's Email Address heartcan@hotmail.com URN etd-05032006-154418 Title Two Essays on Investor Sentiment and Equity Offerings Degree Ph.D. Department Finance Advisory Committee
Advisor Name Title Dr. Jason Greene Committee Chair Keywords
- IPO
- SEO
- Timing
- underpricing
Date of Defense 2006-04-27 Availability restricted Abstract ABSTRACT
TWO ESSAYS ON INVESTOR SENTIMENT AND EQUITY OFFERINGS
BY
HSIN-HUI CHIU
May 2, 2006
Committee Chair: Dr. Jason T. Greene
Major Department: Finance
Using monthly open-end mutual fund flows as a proxy for investor sentiment, I am able to examine the impact of sentiment on IPO volume and underpricing. I find that issuers’ filing decisions are significantly affected by the predicted future sentiment around the expected IPO dates. Furthermore, sentiment has an impact on the final offer price setting and over-allotment options exercised. While previous research documents IPO cycles with respect to other proxies for investor sentiment, I am able to examine IPO cycles and underpricing with respect to sentiment along with investor risk preferences. I hypothesize that a going public firm will try to issue its IPO when investor risk preferences are favorable to the firm’s own risk characteristics. Empirical results based on 5,661 initial public offerings between 1986 and 2004 are consistent with my hypotheses that issuers not only time the market with sentiment in general, but also attempt to incorporate investor risk preferences into their going public decisions. Furthermore, underpricing is more severe when firms issue equity during months with large inflows into equity mutual funds. In my second essay, I find that SEO firms appear to time market efficiently because of the shorter filing periods compared to the average 2-3 months of the IPOs. Also, sentiment not only affects a SEO offer price setting but also affects the over-allotment options exercised. I examine two subgroups of the SEO samples: shelf registration and non-shelf SEOs. I find that shelf-registered SEOs incorporate investor sentiment into offering price to a greater degree compared to regular SEOs. Lastly I find that investor risk preference plays a role in firms’ decision to file prospectuses with the SEC. In other words, firms rationally decide the timing of filing based on the predicted investor preference and try to match firm characteristics with investor preference around the expected SEO date.
Files
Filename Size Approximate Download Time (Hours:Minutes:Seconds)
28.8 Modem 56K Modem ISDN (64 Kb) ISDN (128 Kb) Higher-speed Access chiu_hsinhui_200605_phd.pdf 501.30 Kb 00:02:19 00:01:11 00:01:02 00:00:31 00:00:02 indicates that a file or directory is accessible from the Georgia State University campus network only.