Winner’s Curse and Bandwagon Effect in Malaysian IPOs: Evidence from 2001-2009

Othman Yong

Abstract


ABSTRACT
This paper examines the winner’s curse hypothesis and the bandwagon effect in initial public offerings (IPOs), using
Malaysian IPO data from January 2001 to December 2009. The average initial return (offer-to-close) for the 160
Malaysian private placement IPOs is 18.51 percent as opposed to the average initial return (offer-to-close) of 28.84
percent for the 210 non-private placement IPOs, which gives support to the winner’s curse hypothesis, where uninformed
investors (using non-private placement IPOs as the proxy) demand a higher initial return in the absence of informed
investors (using private placement IPOs as the proxy). The study also finds that the presence of a large number of
informed investors in an IPO exercise, as compared to uninformed investors, brings with it an increased interest, or the bandwagon effect, in that particular stock, which results in higher initial return.

ABSTRAK
Kajian ini meneliti hipotesis sumpahan pemenang dan kesan ikut serta pada tawaran awam permulaan (TAP), dengan
menggunakan data TAP Malaysia dari Januari 2001 hingga Disember 2009. Purata pulangan awal (tawaran-hingga penutup) bagi 160 TAP Malaysia jenis perletakan persendirian adalah 18.51 peratus, berbanding purata pulangan
awal (tawaran-hingga-penutup) sebanyak 28.84 peratus bagi 210 TAP Malaysia jenis bukan perletakan persendirian,
yang menyokong hipotesis sumpahan pemenang, iaitu pelabur kurang berpengetahuan (dengan TAP Malaysia jenis
bukan perletakan persendirian sebagai proksinya) mahukan pulangan awal yang lebih tinggi bilamana tiadanya
pelabur berpengetahuan (dengan TAP Malaysia jenis perletakan persendirian sebagai proksinya) dalam sesuatu TAP. Kajian ini juga mendapati bahawa kehadiran jumlah pelabur berpengetahuan yang besar dalam satu-satu TAP,
berbanding dengan jumlah kehadiran pelabur kurang berpengetahuan, menyebabkan peningkatan minat pada saham yang berkenaan, atau berlakunya kesan ikut serta, yang menghasilkan pulangan awal yang lebih tinggi.


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