The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1743-9132.htm
IJMF
15,4
564
Received 28 February 2018
Revised 30 July 2018
3 October 2018
Accepted 5 October 2018
International Journal of Managerial
Finance
Vol. 15 No. 4, 2019
pp. 564-579
© Emerald Publishing Limited
1743-9132
DOI 10.1108/IJMF-02-2018-0067
Relationship between
prestige signals and
over-subscription ratio
Evidence from Malaysian initial
public offerings
Ali Albada, Othman Yong and Soo-Wah Low
Graduate School of Business, Universiti Kebangsaan Malaysia, Bangi, Malaysia
Abstract
Purpose – The purpose of this paper is to examine whether initial public offering (IPO) over-subscription is a
function of firm’s prestige signals conveyed by third parties with reputational capital such as underwriter,
auditor and independent non-executive board member.
Design/methodology/approach – The relationship between prestige signals and over-subscription ratio
(OSR) of IPOs is analysed using a cross-sectional regression based on a sample of 393 IPOs issued between
January 2000 and December 2015.
Findings – The results indicate that IPOs underwritten by reputable underwriters have lower OSR than
those underwritten by non-reputable underwriters. While issuer engages reputable underwriter to certify firm
quality to reduce information asymmetry, the action brings with it lower initial returns for its IPO. Investors
interpret the signal conveyed by issuer’s choice of underwriter from under-pricing perspective and respond
accordingly by reducing IPO demand. This implies that investors regard under-pricing as a more valuable
signal than firm quality signal associated with underwriter reputation. The findings also indicate that
over-subscription increases in IPOs that have above average initial returns and higher institutional
participation. Issuing firms that go public in a period of high IPO volume are associated with low OSR.
Originality/value – This is the first paper to examine the relationship between the prestige signals and OSR
of IPOs in the Malaysian context.
Keywords Initial public offering, Information asymmetry, Fixed-price mechanism,
Over-subscription ratio, Prestige signals
Paper type Research paper
1. Introduction
Investors’ demand is considered unique to the Malaysian initial public offering (IPO) market
due to the use of fixed-price mechanism in setting the offer price of new issues (Yong,
2007b), where the fixed-price method is the most commonly employed IPO pricing
mechanism in Malaysia (Low and Yong, 2011, 2013; Yong, 2015). Under the fixed-price
mechanism, information on investor demand is available to the general investing public in
the form of IPO over-subscription ratio (OSR). According to Vong (2006), investor demand
plays an important role in IPO success because it reflects direct information regarding
market’s reaction to the new issues. For example, highly demanded IPOs offer a better
opportunity for firms to sell shares in the future due to the reputation gained from the highly
OSR (Vong, 2006), which enhances the liquidity of the newly listed stock (Alanazi et al., 2016;
Loughran and Ritter, 1995). The enhanced liquidity enables the company to raise capital on
more favourable terms in the future rather than having to compensate investors for the lack
of liquidity (Ritter, 1998).
According to Low and Yong (2011), investor demand is a key determinant factor of IPO
success, especially in Malaysia that employs the fixed-price method in pricing IPOs. This
importance is due to the scarcity of pre-market information to estimate investors’ demand
regarding the listing firm’s issues. This implies that issuing firms are facing an unknown
market demand regarding their issues. However, the OSR provides the issuing firms with
the opportunity to gain some information regarding the demand of their issues. The main Prestige signals
reason that issuers are not able to gauge the demand for their issues directly is due to the and over-
use of the fixed-price method, where potential investors are not given the opportunity to subscription
participate in setting up the IPO offer price (Yong, 2015; Low and Yong, 2011). This situation
is the opposite of the book-built pricing method, where the investors are solicited by the ratio
issuers, before the offer prices are set up (Zheng et al., 2005; Yong, 2015).
The use of the fixed-price method in evaluating the offer price of the issuing firms helps 565
in elevating the level of information asymmetry and under-pricing in the IPO market.
According to Yong (2011), the IPO market in Malaysia is characterised by high level of
information asymmetry due to the use of fixed-price mechanism, where the offer price is set
before the allocation of IPOs in the market. However, the level of information asymmetry
and under-pricing is lower under the book-built pricing method than the fixed-price method.
This is because the book-built pricing method is able to strengthen the disclosure of
information, enhance the supervision of offerings and allow prospective investors to
participate in the process of setting the offer price (Zheng et al., 2005). Furthermore, the
model of Chowdhry and Sherman (1996) showed that most of the Asian IPO markets that
employ the fixed-price method have more extreme over-subscription ratios than countries
that employ the book-built method. The present study reports an average OSR of 36.62
times. This figure is in line with those reported by previous studies, for examples, 33.59
times by Low and Yong (2011), 32.8 times by Yong (2011), 43.71 times by Yong and Isa
(2003) and 44 times by Dawson (1987), among others. The huge difference in the OSR
supports the motivation of this study to examine factors that could potentially influence
investor demand in the Malaysian IPO market.
Given the importance of investor demand for IPO success and the high level of
information asymmetry in the Malaysian IPO market, the current study is interested in
investigating some pre-market information that could potentially explain investors’
subscription ratio of fixed-price IPOs by focusing on prestige signals, which are underwriter
reputation, auditor reputation and board reputation. By doing so, this paper extends the
work of Low and Yong (2011) and contributes to the Malaysian literature, through
investigating new pre-market information, prestige signals, that may influence the OSR of
the Malaysian fixed-price IPOs. In their study, Low and Yong (2011) investigated the effect
of actions taking by the issuing firm during the IPO subscription period on the over-
subscription ratio. These actions are related to the issuing firm’s decision in determining the
offer price, issue size, timing of the IPO (hot issue market) and the length of the offer period.
They concluded that an issuing firm could increase over-subscription through timing their
IPOs to coincide with periods of large positive initial returns and low volume of IPO activity.
Furthermore, they reported that over-subscription is negatively correlated with the offer
price and is not significantly related to the issue size.
In this paper, we established that in a fixed-price method, issuing firms do not have
control over investors’ demand for IPOs. We argue that the issuing firms’ actions or
decisions of hiring reputable underwriter, auditor and independent non-executive board
member may influence investors’ subscription for IPOs. Prestige signals conveyed by these
outside third parties may contain information that is useful for investors in making
subscription decisions. The present study suggests that the prestige signals have the ability
to influence IPO subscription by lowering the level of information asymmetry around their
issues, which is done through signifying the quality of the issuing firm to prospective
investors. The signalling literature has identified the ability of the prestige signals in
communicating the true value and quality of the issuing firm to prospective investors.
Rumokoy et al. (2017) concluded that hiring a more reputable underwriter could be used as a
signal to indicate the quality of the issuing firm. Khurana et al. (2017) argued that issuing
firms in countries plagued by weak legal regimes, such as Malaysia, could use auditor
IJMF reputation as a signalling tool to signify their quality and reduce the cost of issuing new
15,4 equity. Finally, Handa and Singh (2017) concluded that board structure is able to signal the
quality of the listing firm.
The current study is interested in investigating prestige signals in the Malaysian IPO
market due to its high level of information asymmetry, which according to Mohd Rashid et al.
(2014) this high level of information asymmetry makes Malaysia the ideal candidate to
566 examine the signalling effect. This argument is guided by the findings of past studies that
indicated the ability of reputable underwriter, auditor and board to lower under-pricing (Tong
and Ahmad, 2015; Khurana et al., 2017; Certo et al., 2001), through reducing the level of
information asymmetry in the IPO process (Ammer and Ahmad-Zaluki, 2016; Sundarasen
et al., 2017; Certo et al., 2001). In the same sense, the current study suggests that the prestige
signals could influence IPO subscription by reducing the level of information asymmetry
around their issues through signalling the quality of the listing firm to prospective investors.
The present study also contributes to the Malaysian literature through investigating the
relationship between the prestige signals and IPO over-subscription ratio, where most of the
prior research investigated the signalling role of the prestige signals around the under-pricing
phenomenon and the concept of asymmetric information. However, the available research so
far provides no direct evidence on the link between prestige signals and IPO over-subscription
ratio[1]. Furthermore, the current study responds to the comment made by Yong (2007a), who
suggested that the effect of auditor reputation on IPOs lacks in the Asian region, especially in
Malaysia. Moreover, the current study extends the work done by Yatim (2011) and Badru et al.
(2017) by narrowing the board reputation definition. The current study argues that
independent non-executive directors (INEDs) can convey the quality of the issuing firms,
which leads to a reduction in IPO under-pricing because prospective investors believe that
prestigious INEDs are well-informed about the future of the issuing firm.
In this study, we build our argument on the idea that reputational prestige is a key signalling
factor for investors in making investment decisions regarding fixed-price IPOs, due to their
ability to reduce the level of information asymmetry and under-pricing around their issues. The
certification of issuer’s quality is particularly valuable to investors owing to the relatively high
asymmetric information associated with fixed-price method. Despite the important role of
reputational capital in signalling a firm’s quality, research on the effects of prestige signals on
investors’ IPO demand remains unexplored. Guided by these discussions, this study examines
the extent to which IPO subscription is affected by the reputations of the underwriter, auditor
and board member, after controlling for the effects of other IPO related factors.
The results indicate that out of the three prestige signals, only the reputation of the
underwriter has significant negative effect on IPO OSR at the 5 per cent level. This shows
that the reputation of the underwriter is able to help the listing firm to signify its quality to
the market, reducing the level of information asymmetry surrounding its issues, and
reducing the under-pricing cost it has to bear during the listing process, especially in the
Malaysian market that is characterised by high level of information asymmetry due to the
use of the fixed-price method. Furthermore, the results indicate that prospective investors
are able to infer the signal that the listing firm is trying to communicate. However, investors
interpret the underwriter reputation signal from its effect on the initial return rather than
from the perspective of the listing firm’s quality. This means that investors in the Malaysian
market are more interested in the capital gain than in the quality of the listing firm. This
result is confirmed by the positive relationship between the demand side of the market and
OSR, which indicates that investors’ demand for IPO shares increases in firms that have
above average initial returns (Low and Yong, 2011).
The remaining of this paper is organised as follows. Section 2 discusses the literature of
the study, while Section 3 presents the data and methodology employed in this study.
The results are presented in Section 4. Finally, Section 5 concludes the paper.
2. Literature review Prestige signals
The Malaysian IPO literature has established the importance of OSR in influencing the and over-
initial return of IPOs. Paudyal et al. (1998) documented that OSR is significantly positive in subscription
determining initial excess return of IPOs. Jelic et al. (2001), on the other hand, employed
market adjusted initial return as the dependent variable and found that over-subscription ratio
has a positive significant relationship with IPO initial return. Yong and Isa (2003)
documented that OSR contributes significantly and positively to IPO initial return. 567
Similarly, Wan-Hussin (2005) also reported that OSR has a significant and positive
relationship with under-pricing. Additionally, for Shariah-compliant Malaysian IPOs,
Abdul-Rahim and Yong (2010) found that a significant positive relationship exists between
initial return and OSR and offer size. This positive relationship between OSR and initial
return has several explanations in the literature. The first explanation is provided by Rock’s
(1986) theoretical model, where he implied that IPOs with higher demand have relatively
higher first-day and long-term returns than IPOs with lower demand. This is because
informed investors are better informed on the fair value of IPO shares than their uninformed
counterparts are. Thus, informed investors would only subscribe to under-priced IPOs.
However, uninformed investors would unknowingly subscribe to all IPOs, under- and over-
priced issues and their purchases are thus biased towards new issues that are unprofitable.
As a result, while under-priced IPOs receive high investor demand from both informed and
uninformed investors, over-priced issues draw demand from uninformed investors only.
The bandwagon effect or informational cascade model of Welch (1992) provided another
theoretical explanation for the positive relationship between IPO demand and initial
performance of IPOs. According to Welch (1992), in deciding whether or not to subscribe to
IPO shares, potential investors make decisions not only based on their personal information
but also on the subscription decisions of other well-informed investors. An information
cascade will form when investors make their decisions by observing the decisions or choices
of others even though they themselves have favourable information. In other words,
investors are not interested to invest in an IPO share that other investors do not wish to buy
even if they possess favourable information about the new issue (Ljungqvist, 2008). With
fixed-price IPOs, the information cascade model implies that to increase investors’ IPO
subscription, an issuer may have to under-price the new issues to kick-start the IPO demand
and later induce a cascade when subsequent investors disregard their personal information
in favour of their observation based on earlier investors’ purchase decisions.

2.1 Signalling characteristics

In the IPO literature, signalling hypothesis is developed based on a core assumption that an
issuing firm knows best about its own prospect and therefore high-quality firms use
signalling variables to convey their firm’s quality to prospective investors and to discourage
low-quality firms from competing against them in the IPO market. A credible signal must
possess several characteristics. The first and foremost characteristic a signal must have is
the ability to communicate the true value and quality of the firm to the market. In the current
study, the prestige signals employed are able to reflect the issuing firm’s quality to
prospective investors. For example, the engagement of a prestigious underwriter in an IPO
exercise could signal the magnitude of risk of the issuing firm to prospective investors
(Logue, 1973; Rumokoy et al., 2017). Furthermore, new issues with reputable auditing firms
(the Big 5) are interpreted by the market as moderate risk firms because prestigious auditors
would normally screen issuing firms and only undertake those with less risk in order to
protect their reputation (Michaely and Shaw, 1995; Hearn, 2013). Moreover, Khurana et al.
(2017) argued that auditor reputation could be used to signal the quality of the issuing firm.
Finally, board prestige is used to signal the issuing firm’s quality to investors, which may
increase IPO performance (Certo, 2003; Yatim, 2011; Handa and Singh, 2017).
IJMF Furthermore, the present study narrows the definition of board reputation by focusing
15,4 on INEDs of the board. INEDs can convey the quality of issuing firms, which subsequently
leads to the reduction in IPO under-pricing because prospective investors believe that
prestigious INEDs are well-informed about the future of the issuing firm. The INEDs
variable is the main focus of the study because Bursa Malaysia Securities has a set of
criteria outlined in the listing requirements that provides definition on INEDs. The inclusion
568 of such criteria in the listing requirement is to guard against relationships and transactions
that may potentially impair a director’s independence. Furthermore, Fama (1980) argued
that INEDs play important role in monitoring management actions as well as in providing
valuable business networking and expert knowledge for management.
Another important characteristic a signal must have is the ability to be naturally
available in advance to prospective investors. That is, a signal must be available before the
new issue offering in order for market participants to utilise the signal effectively. In the
current study, the employed signalling variables such as underwriter reputation, auditor
reputation and board reputation are available to investors in the IPO prospectus and thus
the information can be investigated freely prior to the IPO offer date. According to Butler
et al. (2014), prior IPO information is important and does influence IPO initial return. Their
findings reported that much of the variations in IPO initial return could be explained by the
publicly available information, which is known before the IPO offer date.
According to the signalling theory, the third characteristic of a signal, which is as
equally important as the other characteristics, is that a signal must be costly. By assuming
a sufficiently large cost, a high-quality issuing firm not only can credibly signal its value
but also can make it difficult for a low-quality firm to imitate such signal. According to
Michaely and Shaw (1994), issuing firm use signalling as a tool to reduce agency costs by
conveying the message that it is too costly for low-quality firm to imitate. Neuberger and
Chapelle (1983) categorised underwriters into two groups based on their levels of prestige
in the market. They report that prestigious underwriters reduce information asymmetry
in the IPO market and charge higher fees, which mean, only big firms can afford the cost
of hiring prestigious underwriters. Furthermore, Booth and Smith (1986) investigated
underwriting cost and benefit in testing the significance of underwriter reputation. They
point out that capital reputation is essential for the credibility of the underwriter.
Therefore, the underwriter would try very hard to preserve their reputation in the market,
which helps in reducing information asymmetry in the IPO market. Finally, Sundarasen
et al. (2017) indicated that high-quality issuing firms in Malaysian select costly reputable
underwriters as a platform to market their credibility (see also Logue, 1973; Rumokoy
et al., 2017).
The literature suggests that an issuing firm is able to reduce the level of information
asymmetry around its issues by hiring a reputable auditing firm (i.e. the reputation
hypothesis), which help in reducing the cost of the initial purchasers of securities. According
to Michaely and Shaw (1995), “good” reputable auditors charge higher auditing fees for their
higher quality reporting. Furthermore, Hogan (1997) and Willenborg (1999) documented
that under-pricing was lower for the Big 6 auditing firms. Moreover, Sundarasen et al. (2017)
and Khurana et al. (2017) argued that reputable auditors are costly and could reduce the
level of information asymmetry around the issuing firm’s issues.
Finally, according to Certo et al. (2001) and Yatim (2011), board reputation is a costly
signalling variable and thus very challenging for low-quality firms to imitate.
This suggests that board reputation is capable of reflecting the quality of the issuing
firm and thus reducing the under-pricing around its new issues. Finally, Xu et al. (2017)
concluded that boardroom heterogeneity is costly but it has the potential to communicate
the quality of the firm to prospective investors and reduce the level of uncertainty during
the IPO process.
2.2 Relationship between prestige signals and under-pricing Prestige signals
In the IPO literature, it has been well established that signalling variables such as the and over-
reputations of the underwriter, auditor and board member have a significant negative subscription
relationship with IPOs initial returns. For example, underwriter reputation is reported to
have a negative relationship with the initial return ( Jelic et al., 2001; Neuberger and Chapelle, ratio
1983; Tong and Ahmad, 2015). Similarly, studies on auditor reputation also report a
negative relationship with the initial return (Michaely and Shaw, 1995; Khurana et al., 2017). 569
Finally, board reputation has a negative relationship with the initial return (Certo et al., 2001;
Yatim, 2011; Xu et al., 2017). Collectively, the previous literature indicates that issuing firms
signal their quality with prestige signals as reflected in their choices of the underwriter,
auditor and board member all of which contribute to reducing information asymmetry and
thus resulting in lower IPO initial returns. Guided by the above discussions, and in the
context of the current study, we conjecture that an issuing firm can signal its quality with
prestige signals to influence investors’ demand as reflected in the IPO OSR. For fixed-price
IPOs, while issuing firm has no direct influence on investor demand during the IPO
subscription period, its decisions made during the IPO exercise, for examples, the firm’s
choice of the underwriter, auditor and board member may affect investors’ demand for the
new issue. Hence, examining the potential influence of prestige signals on IPO subscription
is important particularly for fixed-price IPOs given that under the fixed-price method,
issuers are facing an unknown market demand of the new issue.

2.3 Control variables

The Malaysian IPO literature has identified several variables unique to the Malaysian IPO
market that contribute in explaining the OSR. To appropriately capture the effects of prestige
signals on investor demand for IPO shares, the current study controls for the effects of
institutional investor involvement (private placement), market condition, information
asymmetry and hot issue market. Private placement refers to the sale of IPOs directly to
institutional investors who are considered to be knowledgeable investors and thus serve as a
proxy for informed investors (Yong, 2011). In other words, institutional investors represent the
informed side of the investors and they have a significant role in affecting the OSR in the
Malaysian IPO market based on the arguments of Rock’s (1986) winner’s curse model.
The current study also controls for the effects of market condition using the EMAS Index
since it provides a wider coverage of the market than the commonly used FTSE KLCI index.
According to Ritter (1984), in bullish market condition, initial returns tend to be high
because of high market confidence as reflected in high stock prices, market volume and high
value of the stock market index. The opposite is true when the market is in bearish
condition. Following Mahmood et al. (2011), the present study measures contemporaneous
market condition on the listing date using the following equation:
 
PI LI STIN G PI OFFER
M KTCON Listing ¼ ; (1)
PI OFFER

where, PILISTING is the EMAS Price Index on the day of listing, and PIOFFER the EMAS Price
Index on the day of offerings.
In the current study, information asymmetry inherent in an IPO exercise is controlled
using firm size as a proxy, which is calculated by multiplying the offer size of the issues
with the closing price of the first-day of listing (Chahine et al., 2011; Chambers and
Dimson, 2009). Furthermore, the size-based sorting was employed by Agarwal et al. (2008),
and the justification for using firm size as a proxy for information asymmetry was
provided by Beatty and Ritter (1986), Barclay and Smith (1995) and Goergen et al. (2006).
IJMF They argued that younger and smaller firms are exposed to greater uncertainty than
15,4 mature and larger firms.
To proxy for hot issue market, the current study employs two dummy variables
representing the demand side and the supply side of the market. The first proxy represents
the demand side of the market, defined by Ibbotson and Jaffe (1975) as the listing month in
which the average first-day returns of IPOs is higher than the median first-day return and has
570 been used by Low and Yong (2011). However, the current study uses a slightly different
definition, where the demand side proxy takes a value of 1 to represent companies with initial
returns higher than the average of the IPO initial return for the whole year and 0 otherwise.
The reason behind this is that in some listing years, there were only a few issuing firms
available and those firms were listed in different months. For example, in the year 2015, only
seven firms were listed. The second proxy for hot issue market represents the supply side of
the market. Low and Yong (2011) employed the number of firms going public as a proxy. In
this study, the supply side of the market is defined as the number of issues provided by each
firm going public. The supply side proxy takes a value of 1 to represent companies with offer
size higher than the average offer size in the whole year and 0 otherwise.

3. Data and methodology

The sample study period starts from January 2000 to December 2015, comprising a total of
544 IPOs selected based on the issuing year. The sample includes IPOs of various forms
such as public issue, private placement and offer-for-sale, or a hybrid of any of these forms.
The selection of IPOs sample is similar to those of Abdul-Rahim and Yong (2010), Yong
(2007b) and Mohd Rashid et al. (2014). The final study sample excludes several types of
issues that are unique to the Malaysian IPO market because those issues are not available
for subscription by the general public[2]. Furthermore, as stated in Abdul-Rahim and Yong
(2010) and Yong (2007b), these unique types of offers are excluded from the sample to avoid
less meaningful outcomes. Following Mohd Rashid et al. (2014), the current study also omits
IPOs in the Real Estate Investment Trust category due to the different presentation format
of financial statements. After taking into consideration the screening criteria and removing
27 extreme outliers IPOs, the final study sample is reduced from 544 to 393 IPOs[3].
Table I summarises IPOs distribution for the study population as well as the IPOs used
in the final study sample. The distribution of the population and the final sample are
established based on the year of listing.
As indicated by Abdul-Rahim and Yong (2010), the OSR can be used as a measure of
investor demand on IPOs because this variable can indicate the number of times the IPO is
over-subscribed. OSR is built on the suggestion that the IPO supplied is less than investor
demand. Thus, as soon as these IPOs with higher OSR are available for trading in the
market, the investors will more likely bid them up. In other words, additional pressure will
naturally be put on the after-market price of these IPOs due to the excess demand for them,
thus resulting in higher initial return. The OSR equation is presented as follows:

Total number of IPOs Subscribed

OSR ¼ : (2)
Total Offer Units

Listing
Table I. year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Total
Distribution of the
study sample based Population 38 20 51 58 79 79 40 30 23 14 29 21 17 17 15 13 544
on the year of listing Final
( from 2000 to 2015) sample 29 14 41 53 62 56 26 17 11 12 19 19 8 9 10 7 393
The following equation presents the cross-sectional regression model employed to examine Prestige signals
the influence of prestige signals on IPOs subscription: and over-
OSR ¼ aþb1 URi þ b2 ARi þb3 BRi þb4 INFOAi þb5 PRIVi subscription
ratio
þb6 DEMANDi þb7 SU PPLY i þb8 MKTCONi þei ; (3)
where OSR is a measure of investors’ demand on IPOs indicated by the number of times the 571
IPO is over-subscribed, UR is a dummy variable for underwriter reputation that takes a
value of 1 for Big 3 underwriter and 0 otherwise, AR is the dummy variable for auditor
reputation which takes a value of 1 for Big 3 auditor and 0 otherwise, and BR is board
reputation which is measured as the overall number of directorships held by the INEDs. The
current study measures underwriter and auditor reputations using the number of issues
that an investment bank or auditing firm has underwritten or audited as lead manager or
lead auditor. In other words, the Big 3 underwriters or auditors are those with the highest
proportion of underwritten or audited issues in the IPO market. Such reputation criteria
have been employed by Jelic et al. (2001) and Dimovski et al. (2011) to measure underwriter
reputation, and by Megginson and Weiss (1991) to measure auditor reputation. The current
study employs five control variables. INFOA is a proxy for information asymmetry
measured using firm size and calculated as the total number of issues multiplied by closing
price; PRIV represents institutional investor involvement which takes a value of 1 to
represent firms with private placement and 0 otherwise; DEMAND represents the demand
side of the market that takes the value of 1 for firms with initial return higher than the
average IPO initial return for the whole year and 0 otherwise; SUPPLY is the supply side of
the market with the value of 1 for firms with offer size higher than the average offer size of
all listed IPOs for the whole year and 0 otherwise; MKTCON is market condition that takes
EMAS Index as a proxy for listed firms in both the Main Market and ACE Market since the
EMAS index provides a wider coverage of the Malaysian stock market[4].

4. Results
Table II presents the descriptive statistics for the sample of 393 IPOs, listed from January
2000 to December 2015. The reported average OSR is 36.62 times which is in line with
previous studies. For examples, the average over-subscription for Low and Yong (2011) is
33.59 times and 32.8 times for Yong (2011). The minimum over-subscription is –0.89 times,
while the maximum over-subscription is 377.96 times, indicating that OSR varies for each
IPO issued in Malaysia. The huge difference in the OSR supports the motivation of this
study to examine factors that could potentially influence investor demand. Furthermore,
market capitalisation, which represents firm size has an average value of RM43m with the
lowest and highest values being RM2.25m and RM811m, respectively. This shows that there
is a huge difference in size between small and big firms in the Malaysian market. Similar
observation can be made for the supply of IPOs where the lowest and highest values are
RM2m and RM732m, respectively.
Table III shows the Spearman rank correlation results for variables employed in the
current study. The results indicate that of the three prestige signals, only underwriter

Variable Obs. Mean SD Min. Max.

OSR 393 33.62 50.29 −0.89 377.96

Supply of IPOs 393 36 M 52.9 M 2M 732 M
Firm size 393 RM 43 M RM 58 M RM 2.25 M RM 811 M Table II.
Market condition 393 0.667 4.625 −20.001 12.986 Descriptive statistics
IJMF No. OSR 1 2 3 4 5 6 7
15,4
1 −0.1237* 1
2 −0.0771 0.0973 1
3 −0.0844 0.0625 0.0085 1
4 −0.1104* 0.1576* 0.1229* 0.1733* 1
5 0.0552 −0.0268 0.0462 0.1843* −0.0404 1
572 6 −0.0466 0.0845 0.0604 0.0322 0.0147 0.0958 1
7 0.4538* −0.0319 −0.0323 −0.0993* 0.0149 0.0645 0.1984* 1
Table III.
8 −0.2346* 0.1417* 0.0985 0.0258 0.6663* −0.0868 0.0111 −0.1815*
Spearman’s
correlations between Notes: N ¼ 393. No. 1 represents Big 3 reputable underwriters, No. 2 represents Big3 reputable auditors,
over-subscription No. 3 represents board reputation, No. 4 represents firm size, No. 5 represents private placement, No. 6
ratio and the represents market conditions, No. 7 represents demand side of the market, and No. 8 represents supply side of
study variables the market. *Denotes statistical significance at the 10 per cent level

reputation has a significant negative relationship with the OSR. Firm size and the supply
side of the market variables are also negatively and significantly related to OSR. However,
the private placement variable, a proxy for the presence of informed investors, and the
demand side of the market variable are positively related to OSR.
Table IV reports the cross-sectional regression results regarding the relationship between
the IPO subscription (dependent variable) and prestige signals (independent variable), which
are represented by the reputations of the underwriter, auditor and independent non-executive
board member. Each of the prestige signals is introduced separately into the regression model
and hence the three separate regression models as shown by model 1 through model 3. In
model 4, all of the three prestige signals are examined together.
As reported in models 1 and 4, of the three prestige signals, only underwriter reputation
has a significant relationship with IPO OSR. The relationship is negative and significant at
the 5 per cent level. The results suggest that IPOs underwritten by prestigious underwriters
have lower OSR than those underwritten by less prestigious underwriters. In other words,
an issuing firm that hires reputable underwriters in an effort to convey firm’s quality to
potential investors will unknowingly have to bear the outcome of reduced investor demand
for its IPO shares. Such intuition can be described using under-pricing explanation. In
Malaysia, the level of under-pricing is still higher than other developed and developing
countries and that is due to the high level of information asymmetry. The latest updated

Variables Model 1 Model 2 Model 3 Model 4

Dependent variable: over-subscription ratio

Big3 underwriters −10.143 (−2.28)** −9.889 (−2.32)**
Big3 auditors −2.467 (−0.0.54) −1.697 (−0.38)
Board reputation −1.754 (−0.68) −1.446 (−0.57)
Firm size −6.25 (−2.12)** −5.84 (−1.85)* −5.49 (−1.76)* −5.720 (−1.93)*
Private placement 9.146 (2.18)** 9.591 (2.24)** 10.187 (2.33)** 9.852 (2.21)**
Demand side of the market 39.334 (6.7)*** 39.487 (6.66)*** 39.235 (6.6)*** 39.003 (6.61)***
Supply side of the market −8.113 (−2.2)** −9.620 (−2.52)** −10.021 (−2.57)** −8.230 (−2.23)**
Market conditions (neglog)a −2.633 (−2.05)** −2.911 (−2.29)** −2.882 (−2.23)** −2.536 (−1.93)*
Constant 22.866 (5.57)*** 18.990 (5.04)*** 21.816 (3.54)*** 26.468 (4.47)***
Number of obs. 393 393 393 393
F-value (11.72)*** (11.58)*** (11.55)*** (8.85)***
Table IV. R2 0.1901 0.1808 0.1809 0.191
Cross-sectional Notes: aThe neglog is a transformation method proposed by Whittaker et al. (2005) to handle the log
regression results transformation of negative values. *,**,***Significant at the 10, 5 and 1 per cent levels, respectively
version (16 February 2015) of Loughran’s et al. (1994) table reports the average initial return Prestige signals
of various developed and developing markets in the Asian region. Figure 1 shows that and over-
Malaysia is ranked fourth among the Asian countries with an average initial return of subscription
56.2 per cent. Moshirian et al. (2010) documented an interesting fact relating to the listing
requirements. They concluded that the initial return in emerging markets, where the listing ratio
requirements were lenient, was higher in comparison to developed markets, where the
listing requirements were more stringent. Furthermore, in an early study by Jelic et al. 573
(2001), which covered a sample of 182 Malaysian IPOs from 1980 to 1995, concluded that
initial returns in an immature market such as Malaysia is high due to a weak regulatory
environment and the failure of investment bankers to adequately manage the process of
listing new issues. Finally, Mohd Rashid et al. (2014) concluded that the initial returns in the
Malaysian IPO market is still higher than other developed and developing market due to the
high level of information asymmetry in the Malaysian IPO market. In their study, they
focussed on the issue of the lock-up period within the Malaysian IPO market and its
relationship with IPO under-pricing from January 2000 to December 2012.
In this regard, Moshirian et al. (2010) concluded that investors prefer to invest in the
IPOs of such developing markets, Malaysia, because they can earn abnormal returns
through subscribing to the newly issued shares during the first day of listing and sell
them at the end of the listing day. Furthermore, the model of Chowdhry and Sherman
(1996) showed that countries that employed fixed like pricing mechanisms for instance,
UK and most of Asian IPO markets experience larger under-pricing levels and more
extreme OSRs than countries that use US book-built method. This confirms the high
reported average OSR of 36.62 times that reported in this study. However, the literature
showed that hiring a reputable underwriter will help the issuing firm in reducing the level
of information asymmetry around its issues and that helps in reducing the amount of
money left on the table by reducing under-pricing. This is done through the ability of the
underwriters’ reputation in signalling the quality of the issuing firm to prospective
investors (Rumokoy et al., 2017). Finally, in a recent study by Tong and Ahmad (2015),
they reported a negative relationship between underwriter reputation (Big 5 underwriters)
and under-pricing in the Malaysian IPO market, which means that the higher the
reputation of an underwriter, the lower the level of under-pricing. Their study covered
322 IPOs, from January 2002 to December 2008.
Our finding suggests that IPOs underwritten by Big 3 underwriters are associated with
significantly lower OSR, which implies that the signal conveyed by reputable underwriter is

140.00%
120.00%
Under-pricing %

100.00%
80.00%
60.00%
40.00%
20.00%
0.00%
na

al a
a

Ta n
Th an

iL d
ng a

do e
Pa sia

N ust n
Ze lia
ilip nd

g s
ng
on e
di

e
si
pa

Sr lan
Si ank

In por

A ta

Figure 1.
ew ra

H pin
iw
hi

Ph ala

Ko
ay

ne
In

s
Ko

Ja
C

ai

ki
a

Average initial return

M

in various Asian
countries
Sources: Loughran’s et al. (1994). The latest updated version (16th of February 2015)
IJMF interpreted by investors from under-pricing rather than from firm valuation perspective.
15,4 While reputable underwriter’s certification role helps to mitigate asymmetric information
inherent in IPO process, investors seem to care more on the outcome of lower initial returns
than on firm’s quality information conveyed through underwriter reputation. This suggests
that investors regard under-pricing outcome as a more valuable signal than firm valuation
signal associated with reputational prestige. Our finding implies that when hiring reputable
574 underwriters, an issuer faces a trade-off between leaving less money on the table and
bearing the outcome of reduced IPO demand from investors. That is, to attract investors’
interest and to increase IPO subscription, issuers must be willing to leave more money on
the table, given that investors are more likely to associate reputable underwriters with lower
initial returns than with higher firm quality. As reported in models 2 and 3, we find no
influence of both auditor reputation and board member reputation on IPO over-subscription.
That is, investors place no importance on the reputations of auditor and board member
when deciding whether or not to subscribe to the IPO shares.
The results for firm size in all models 1 through 4 indicate that larger firms are associated
with significantly lower OSR. These findings are consistent with that of Tajuddin et al.
(2015) regarding the Malaysian IPO market, suggesting that larger firms are less likely than
smaller firms to experience IPO over-subscription.
The private placement variable which captures the involvement of informed investors is
positively and significantly related to IPO over-subscription at the 5 per cent level in all the
four models. This suggests that over-subscription increases with more institutional investor
participation in the IPO exercise the finding is consistent with the argument of Rock (1986)
that higher involvement of institutional investors leads to higher IPO demand from
investors. Such finding is also similar to that of Tajuddin et al. (2015).
In all of the four models, we observe a highly significant impact of hot issue market on
IPO over-subscription and this can be viewed from both the demand and supply sides of
the IPO market. On the demand side of the market measured by initial return dummy
variable, the findings in all four models indicate a strong positive relation between IPO
over-subscription and periods of high positive initial returns. This suggests that investors’
demand for IPO shares increases in firms that have above average initial returns. On the
supply side of the IPO market, the IPO volume dummy variable is negatively related to
OSR and the relationship is significant at the 5 per cent level in all models. That is, if firms
go public in a year in which the number of new issues is relatively high, the IPO OSR
is likely to be low. These results in hot issue market are consistent with those of Low and
Yong (2011).
The results for market condition variable show that the stock market condition as
measured by the movements in stock market index is inversely related to IPO over-
subscription. That is, bullish (bearish) market condition leads to high (low) investor demand
of the IPO shares. The finding is consistent with the argument of Loughran and Ritter (2002)
that past market conditions play important role in influencing investors’ share subscription
decisions. Additionally, the results are also consistent with information portrayed by
Figure 2, showing that the trend of the average initial returns in the Malaysian IPO market
follows closely the trends of the market conditions.

5. Conclusion
The present study examines the influencing effect of prestige signals on IPO OSR.
Specifically, we examine the role of reputable underwriter, auditor and independent non-
executive board member in influencing investors’ demand of IPO shares in the context of
the Malaysian IPO market. The study sample consists of 393 IPOs listed on Bursa
Malaysia from January 2000 to December 2015. The study employs OLS technique in
investigating the relationship between the dependent and independent variables.
 80 80 Prestige signals
and over-
Average initial return and market condition

60 60
subscription

Number of firms going public

40 40 ratio
20 20
575
0 0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

–20 –20

Figure 2.
–40 –40
Relationship between
initial returns and
–60 –60 market conditions
Listed firms Market condition Initial return

The results indicate that of the three prestige signals, only the reputation of the
underwriter has a significant negative effect on IPO OSR at the 5 per cent level. Several
implications can be inferred from this result. First, the presence of signalling effect of the
underwriter reputation in the Malaysian IPO market, which confirms the findings of the
previous studies. Second, the results signify the ability of underwriter reputation to lower
the level of information asymmetry surrounding the listing firm’s issues, which in turn
reduces the level of information asymmetry around its issues, and reduces the under-
pricing cost it has to bear during the listing process, especially, in the Malaysian market
that is characterised by high level of information asymmetry due to the use of the fixed-
price method. However, our findings suggest that the signal conveyed by the reputable
underwriter is being interpreted by investors from the under-pricing perspective rather
than from quality perspective. This implies that investors in the Malaysian market are
more interested in the capital gain than in the quality of the listing firm, possibly due to
the reason that investors benefit directly from the under-pricing issues. This result is
further confirmed by the finding of a positive relationship between the demand side of the
market and OSR, indicating that investors’ demand for IPO shares increases in firms that
have above average initial returns. We find that the reputation of auditor and board
members play no role in influencing the IPO OSR. On control variables, the finding for
private placement shows that a larger proportion of institutional investors are associated
with higher OSR. We also find that large firms that go for listing in a year with high IPO
volume tend to experience low OSR. Finally, the findings of this study expand existing
literature on signalling role and offers useful insights on IPO related factors that are
important in explaining OSR of fixed-price IPOs.

Notes
1. The relationship between underwriter reputation and under-pricing in the Malaysian IPO market
was studied by Jelic et al. (2001), Tong and Ahmad (2015) and Ammer and Ahmad-Zaluki (2016).
Furthermore, Yatim (2011) and Badru et al. (2017) studied the relationship between board structure
and under-pricing in the Malaysian IPO market.
2. Examples of these issues are restricted offer-for-sale, restricted public issue, restricted
offer-for-sale to eligible employees, restricted offer-for-sale to Bumiputra (Malays and
indigenous people) investors, special and restricted issues to Bumiputra investors, tender
offers and special issues.
3. The present study removes extreme outliers using studentised residuals (Ruppert, 2004), DFITS
and Cooks (Rahman et al., 2012). As suggested by Ryan (2009), DFITS and Cooks allow for the
IJMF simultaneous detection of both extreme outliers and influential observations. The rule of thumb is
15,4 to remove outliers only if the outliers are also influential. This is because outliers can only influence
the regression estimates under such circumstances.
4. The EMAS Index is a capitalisation weighted index. The index comprises large and mid-cap
constituents of the FTSE Bursa Malaysia 100 Index and the FTSE Bursa Malaysia Small Cap
Index. The index was developed with a base value of 6,000 as of 31 March 2006.
576
References
Abdul-Rahim, R. and Yong, O. (2010), “Initial returns of Malaysian IPOs and Shari’a compliant status”,
Journal of Islamic Accounting and Business Research, Vol. 1 No. 1, pp. 60-74.
Agarwal, S., Liu, C. and Rhee, S.G. (2008), “Investor demand for IPOs and after-market performance:
evidence from the Hong Kong stock market”, Journal of International Financial Markets
Institutions and Money, Vol. 18 No. 2, pp. 176-190.
Alanazi, A.S., Liu, B. and Al-Zoubi, H.A. (2016), “IPO under-pricing in supply and demand framework:
evidence from a market of retailers”, Applied Economics, Vol. 48 No. 60, pp. 5835-5849.
Ammer, M.A. and Ahmad-Zaluki, N.A. (2016), “The effect of underwriter’s market share, spread and
management earnings forecasts bias and accuracy on under-pricing of Malaysian IPOs”,
International Journal of Managerial Finance, Vol. 12 No. 3, pp. 351-371.
Badru, B.O., Ahmad-Zaluki, N.A. and Wan-Hussin, W.N. (2017), “Board characteristics and the amount
of capital raised in the Malaysian IPO market”, Journal of Multinational Financial Management,
Vols 42/43, pp. 37-55, available at: www.sciencedirect.com/science/article/pii/S1042444X17300944
Barclay, M.J. and Smith, C.W. (1995), “The maturity structure of corporate debt”, Journal of Finance,
Vol. 50 No. 2, pp. 609-631.
Beatty, R.P. and Ritter, J.R. (1986), “Investment banking, reputation, and the under-pricing of initial
public offerings”, Journal of Financial Economics, Vol. 15 Nos 1/2, pp. 213-232.
Booth, J.R. and Smith, R.L. (1986), “Capital raising, underwriting and the certification hypothesis”,
Journal of Financial Economics, Vol. 15 No. 1, pp. 261-281.
Butler, A.W., Connor, M.O. and Kieschnick, R. (2014), “Robust determinants of IPO under-pricing and
their implications for IPO research”, Journal of Corporate Finance, Vol. 27 No. 1, pp. 367-383.
Certo, S.T. (2003), “Influencing initial public offering investors with prestige: signalling with board
structures”, Academy of Management Review, Vol. 28 No. 3, pp. 432-446.
Certo, S.T., Daily, C.M. and Dalton, D.R. (2001), “Signalling firm value through board structure: an
investigation of initial public offerings”, Entrepreneurship: Theory and Practice, Vol. 26 No. 2,
pp. 33-50.
Chahine, S., Filatotchev, I. and Zahra, S.A. (2011), “Building perceived quality of founder-involved IPO
firms: founders' effects on board selection and stock market performance”, Entrepreneurship:
Theory and Practice, Vol. 35 No. 2, pp. 319-335.
Chambers, D. and Dimson, E. (2009), “IPO under-pricing over the very long run”, Journal of Finance,
Vol. 64 No. 3, pp. 1407-1443.
Chowdhry, B. and Sherman, A. (1996), “International differences in over-subscription and under-
pricing of IPOs”, Journal of Corporate Finance, Vol. 2 No. 4, pp. 359-381.
Dawson, M.S. (1987), “Secondary stock market performance of initial public offers, Hong Kong,
Singapore and Malaysia: 1978-1984”, Journal of Business Finance and Accounting, Vol. 14 No. 1,
pp. 65-76.
Dimovski, W., Philavanh, S. and Brooks, R. (2011), “Underwriter reputation and under-pricing:
evidence from the Australian IPO market”, Review of Quantitative Finance and Accounting,
Vol. 37 No. 4, pp. 409-426.
Fama, E.F. (1980), “Agency problems and the theory of the firm”, Journal of Political Economy, Vol. 88
No. 2, pp. 288-307.
Goergen, M., Renneboog, L. and Khurshed, A. (2006), “Explaining the diversity in shareholder lock-up Prestige signals
agreements”, Journal of Financial Intermediation, Vol. 5 No. 2, pp. 254-280. and over-
Handa, R. and Singh, B. (2017), “Performance of Indian IPOs: an empirical analysis”, Global Business subscription
Review, Vol. 18 No. 3, pp. 734-749.
ratio
Hearn, B. (2013), “The determinants of IPO firm prospectus length in Africa”, Review of Development
Finance, Vol. 3 No. 2, pp. 84-98.
Hogan, C.E. (1997), “Costs and benefits of audit quality in the IPO market: a self-selection analysis”, 577
Accounting Review, Vol. 72 No. 1, pp. 67-86.
Ibbotson, R.G. and Jaffe, J.F. (1975), “Hot issue markets”, Journal of Finance, Vol. 30 No. 1,
pp. 1027-1042.
Jelic, R., Saadouni, B. and Briston, R. (2001), “Performance of Malaysian IPOs: underwriters
reputation and management earnings forecasts”, Pacific-Basin Finance Journal, Vol. 9 No. 5,
pp. 457-486.
Khurana, I., Ni, C. and Shi, C. (2017), “The role of big 4 auditors in the global primary market: does audit
quality matter most when investors are protected least?”, presented at Asian Bureau of Finance
and Economic Research Annual Conference, Gardenia.
Ljungqvist, A. (2008), “IPO under-pricing”, in Eckbo, B.E. (Ed.), Handbook of Empirical Corporate
Finance, 1st ed., Elsevier Science, Amsterdam, pp. 375-422.
Logue, D.E. (1973), “On the pricing of unseasoned equity issues: 1965–1969”, Journal of Financial and
Quantitative Analysis, Vol. 8 No. 1, pp. 91-103.
Loughran, T. and Ritter, J.R. (1995), “The new issues puzzle”, Journal of Finance, Vol. 50 No. 1, pp. 23-51.
Loughran, T. and Ritter, J.R. (2002), “Why do not issuers get upset about leaving money on the table in
IPOs?”, Review of Financial Studies, Vol. 15 No. 2, pp. 413-443.
Loughran, T., Ritter, J.R. and Rydqvist, K. (1994), “Initial public offerings: international insights”,
Pacific-Basin Finance Journal, Vol. 3 No. 1, pp. 139-140.
Low, S.W. and Yong, O. (2011), “Explaining over-subscription in fixed-price IPOs: evidence from the
Malaysian stock market”, Emerging Markets Review, Vol. 12 No. 1, pp. 205-216.
Low, S.W. and Yong, O. (2013), “Initial public offerings and investor heterogeneity: evidence from
Malaysia”, American Journal of Finance and Accounting, Vol. 3 No. 1, pp. 41-56.
Mahmood, F., Xia, X., Ali, M., Usman, M. and Shahid, H. (2011), “How Asian and global economic crises
prevail in Chinese IPO and stock market efficiency”, International Business Research, Vol. 4
No. 2, pp. 226-237.
Megginson, L. and Weiss, A. (1991), “Venture capitalist certification in initial public offerings”, Journal
of Finance, Vol. 46 No. 3, pp. 879-903.
Michaely, R. and Shaw, W.H. (1994), “The pricing of initial public offerings: tests of adverse-selection
and signalling theories”, Review of Financial Studies, Vol. 7 No. 2, pp. 279-319.
Michaely, R. and Shaw, W.H. (1995), “Does the choice of auditor convey quality in an initial public
offering?”, Journal of the Financial Management Association, Vol. 24 No. 4, pp. 15-30.
Mohd Rashid, R., Abdul-Rahim, R. and Yong, O. (2014), “The influence of lock-up provisions
on IPO initial returns: evidence from an emerging market”, Economic Systems, Vol. 38 No. 4,
pp. 487-501.
Moshirian, F., Ng, D. and Wu, E. (2010), “Model specification and IPO performance: new insights from
Asia”, Research in International Business and Finance, Vol. 24 No. 1, pp. 62-74.
Neuberger, B.M. and Chapelle, C.A.L. (1983), “Unseasoned new issue price performance on three tiers:
1975–1980”, Financial Management, Vol. 12 No. 3, pp. 23-28.
Paudyal, K., Saadouni, B. and Briston, R.J. (1998), “Privatisation initial public offerings in Malaysia:
initial premium and long-term performance”, Pacific-Basin Finance Journal, Vol. 6 No. 5,
pp. 427-451.
IJMF Rahman, S.M.A.K., Sathik, M.M. and Kannan, K.S. (2012), “Multiple linear regression models in outlier
15,4 detection”, International Journal of Research in Computer Science, Vol. 2 No. 2, pp. 23-28.
Ritter, J.R. (1984), “Signalling and the valuation of unseasoned new issues: a comment”, Journal of
Finance, Vol. 39 No. 4, pp. 1231-1237.
Ritter, J.R. (1998), “Initial public offerings”, Contemporary Finance Digest, Vol. 2 No. 1, pp. 5-30.
Rock, K. (1986), “Why new issues are under-priced”, Journal of Financial Economics, Vol. 15 Nos 1/2,
578 pp. 187-212.
Rumokoy, L.J., Neupane, S., Chung, R.Y. and Vithanage, K. (2017), “Underwriter network structure
and political connections in the Chinese IPO market”, Pacific-Basin Finance Journal, Vol. 54,
pp. 199-214.
Ruppert, D. (2004), Statistics and Finance an Introduction, Springer, New York, NY.
Ryan, T.P. (2009), Modern Regression Methods, 2nd ed., Wiley, Hoboken, NJ.
Sundarasen, S.D., Khan, A. and Rajangam, N. (2017), “Signalling roles of prestigious auditors and
underwriters in an emerging IPO market”, Global Business Review, Vol. 19 No. 1, pp. 69-84.
Tajuddin, A.H., Mohd-Rashid, R., Abdullah, N.A.H and Abdul-Rahim, R. (2015), “An empirical
examination of over-subscription in the Malaysian IPO market”, International Journal of
Economics and Management, Vol. 9(S), pp. 81-102.
Tong, L.Y. and Ahmad, R. (2015), “The signalling power of the investment banks’ reputation on the
performance of IPOs on Bursa Malaysia”, Journal Pengurusan, Vol. 45 No. 1, pp. 1-16.
Vong, A.P. (2006), “Rate of subscription and after-market volatility in Hong Kong IPOs”, Applied
Financial Economics, Vol. 16 No. 1, pp. 1217-1224.
Wan-Hussin, W.N. (2005), “The effects of owners’ participation and lock-up on IPO under-pricing in
Malaysia”, Asian Academy of Management Journal, Vol. 10 No. 1, pp. 19-36.
Welch, I. (1992), “Sequential sales, learning, and cascades”, Journal of Finance, Vol. 47 No. 2,
pp. 695-732.
Whittaker, J., Whitehead, C. and Somers, M. (2005), “The neglog transformation and quantile
regression for the analysis of a large credit scoring database”, Applied Statistics, Vol. 54 No. 5,
pp. 863-878.
Willenborg, M. (1999), “Empirical analysis of the economic demand for auditing in the initial public
offering market”, Journal of Accounting Research, Vol. 37 No. 1, pp. 225-238.
Xu, Z., Wang, L. and Long, J. (2017), “The impact of directors’ heterogeneity on IPO under-pricing”,
Chinese Management Studies, Vol. 11 No. 2, pp. 230-247.
Yatim, P. (2011), “Under-pricing and board structures: an investigation of Malaysian initial public
offerings (IPOs)”, Asian Academy of Management Journal of Accounting and Finance, Vol. 7
No. 1, pp. 73-93.
Yong, O. (2007a), “A review of IPO research in Asia: what’s next?”, Pacific-Basin Finance Journal,
Vol. 15 No. 3, pp. 253-275.
Yong, O. (2007b), “Investor demand, size effect, and performance of Malaysian initial public offerings:
evidence from post-1997 financial crisis”, Journal Pengurusan, Vol. 26 No. 1, pp. 25-47.
Yong, O. (2011), “Winner’s curse and bandwagon effect in Malaysian IPOs: evidence from 2001–2009”,
Journal Pengurusan, Vol. 32 No. 1, pp. 21-26.
Yong, O. (2015), “What is the ‘true’ value of an initial public offering?”, Journal of Scientific Research
and Development, Vol. 2 No. 10, pp. 78-85.
Yong, O. and Isa, Z. (2003), “Initial performance of new issues of shares in Malaysia”, Applied
Economics, Vol. 35 No. 8, pp. 919-930.
Zheng, S.X., Ogden, J.P. and Jen, F.C. (2005), “Pursuing value through liquidity in IPOs: under-pricing,
share retention, lock-up, and trading volume relationships”, Review of Quantitative Finance and
Accounting, Vol. 25 No. 3, pp. 293-312.
Further reading Prestige signals
Chahine, S. (2007), “Investor interest, trading volume, and the choice of IPO mechanism in France”, and over-
International Review of Financial Analysis, Vol. 16 No. 2, pp. 116-135. subscription
Hsiao, C. (2003), Analysis of Panel Data, 2nd ed., Cambridge University Press, Cambridge.
ratio
Hsiao, C. (2007), “Panel data analysis – advantages and challenges”, Test, Vol. 16 No. 1, pp. 1-22.
McDonald, J. and Fisher, A. (1972), “New-issue stock price behaviour”, Journal of Finance, Vol. 27 No. 1,
pp. 97-102. 579
Welch, I. (1989), “Seasoned offerings, imitation costs, and the under-pricing of initial public offerings”,
Journal of Finance, Vol. 44 No. 2, pp. 421-449.

Corresponding author
Ali Albada can be contacted at: ali.albada@gmail.com

For instructions on how to order reprints of this article, please visit our website:
www.emeraldgrouppublishing.com/licensing/reprints.htm
Or contact us for further details: permissions@emeraldinsight.com