Initial Public Offerings’ (IPOs) Initial Returns and Volatility of Initial Returns and the Moderation Effects of Institutional Arrangements: A Study on Selected Asia Pacific Countries

Abstract

This study looks into the relationship between several signaling variables, i.e., underwriters/auditors reputation and ownership retention on the initial return/ volatility of initial returns of IPOs in the selected Asia Pacific countries and the moderating effect of institutional arrangements on this relationship. The institutional arrangements considered are transparency level and country of legal origin. The Asia Pacific countries in this study includes Japan, South Korea, Australia and New Zealand, with a sample of size of 2179 IPOs. Ordinary least square method is adopted in this cross-sectional study. The findings suggest that institutional arrangements play a pivotal role in moderating the established relationships on the variables tested. Country of legal origin and transparency levels moderates the relationship between underwriter’s reputation and ownership retention on the volatility of initial returns but no moderation effect is documented for auditor’s reputation.