7
Road shows
serve two main purposes,
to attract potential
investors
and
provide
them
with
information
regarding
the
offerings,
and
collecting
information
for
the
issuer
to
determine
the
offer
price
of the
shares.
Road
shows
and
book
building
provides
a
valuable
information
since
a
large
group
of
investors
might
have
useful
insights
on
the
demands
of the
shares
as well
as
the
future
prospects
of
the
company
and
its
competitors
(Bodie
et al,
2002).
By
doing
roadshows,
issuer
will
gain
more
information
from
the
investors
and
revised
the
offering
price;
this
could
reduce
the
underpricing and
information
asymmetry.
In the United States of America, the number of company that uses fixed-price
marketing method is
significantly smaller than book building method. There has
been
some
historical
evidence
from
United
States
of
America
that
suggests
fixed-
priced
issues,
tend
to result
in
higher
initial
returns
for
investors
because
of
the
underpricing
due
to
the
information
asymmetry
(Financial
Express,
2005).
Despite
these
findings
that
fixed-priced
issues
provide
higher
initial
returns
for
the
investor,
book
building
marketing
method
seems
to
be
the
more
popular
of
the
two
in
the
United States of America.
The
nature
of
book
building
in
allowing the
price
discovery to
take
place
before
setting
the
offering
price
will
reduce
the
information
asymmetry
that
will
reflect
in
the IPO aftermarket
performance.
This paper will investigate
the market
performance
of
book
built
IPOs
in
reducing
information
asymmetry compared to
fixed
price
method.
The
first
research
problem
for
this
paper
will
be
the
aftermarket
performance
on book built IPOs.
Research Problem 1:
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