35
2.2 Theoretical
Framework
Based
on
the
theoretical
foundation
described
in
the
previous
section,
the
author
has
mentioned
the
concepts
of the
book
building
method,
initial
return,
long
run
performance,
and characteristics
of the firms.
Book
building
is
a marketing
method
that
has
a nature
to
help
in
reducing
the
information
asymmetry
in
the
IPO
market.
Since
book
building
are
able
to reduce
information
asymmetry
more
than
fixed
price
methods,
it
is
expected
that
book
built
IPOs will be less underpriced than fixed price IPOs.
H1: Book Built IPOs will be less underpriced
than fixed price IPOs.
Since there is
less information asymmetry problem in
the book built IPOs, it
is
expected
that
there
will
be
less
overreaction
in
the
initial
market-trading
days,
which
will
affect
the
long-run
performance,
due
to the
reduced
volatility.
Therefore,
it
is
expected
that
book
built
IPOs
will
have
lower
underperformance
than
fixed
price
IPOs.
H2:
Book
built
IPOs
will
results
in
lower
underperformance
in
the
long
run
than
fixed price IPOs.
For
the
third
hypothesis,
the
author
would
like
to
investigate
the
characteristics of
firms
that
might
influence
the
issuer’s choice
of
marketing
method
in
hope
that
their
choice
will
reduce
the
information
asymmetry.
The
characteristics
of
the
firms
that
will
be
included
in
this
research
will be
the
size,
age,
industry
and
ownership
of
the
firm.
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