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Underpricing in a developing capital market: Australian equity issuances, 1920–39†

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  • Grant Fleming
  • Zhangxin (Frank) Liu
  • David Merrett
  • Simon Ville
Abstract
Developing capital markets generally lack the regulatory safeguards and rich informational sources that assist investors in judging new equity issues in modern markets. Focusing on the early stage capital market in interwar Australia, we calculate the success (underpricing and percentage raised) of 786 new equity issues, comparing initial public offerings, seasoned equity offerings, and rights issues. We examine whether the use of underwriters and the choice of security (ordinary or preference shares) affected the success of the equity issue. We find that certification by underwriters had no effect on capital‐raising success once we controlled for firm‐specific factors in the multivariate regressions, while underpricing and percentage raised varied by type of shares offered to investors.

Suggested Citation

  • Grant Fleming & Zhangxin (Frank) Liu & David Merrett & Simon Ville, 2021. "Underpricing in a developing capital market: Australian equity issuances, 1920–39†," Economic History Review, Economic History Society, vol. 74(3), pages 831-855, August.
    • Handle: RePEc:bla:ehsrev:v:74:y:2021:i:3:p:831-855
    DOI: 10.1111/ehr.13054
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    Cited by:

    1. Grant Fleming & Frank Liu & David Merrett & Simon Ville, 2021. "The Australian corporate bond market before credit ratings, 1915-83," CEH Discussion Papers 03, Centre for Economic History, Research School of Economics, Australian National University.
    2. Wilco Legierse, 2023. "Offering Method and Pricing of IPOs: An Analysis of Stock IPOs in the Netherlands, 1918–1939," De Economist, Springer, vol. 171(3), pages 207-238, September.

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