IPOs’ signalling effects for speculative stock detection: evidence from the Stock Exchange of Thailand

Kulabutr Komenkul, Mohamed Sherif, Bing Xu

Research output: Contribution to journalArticle

Abstract

Using a unique data set from the Thai stock market about the so-called, ‘Turnover List (TOL)’ of speculative stocks spanning the period 2004–2012, we investigate and provide new evidence on the relationship between IPOs’ pricing effects and subsequent classification as speculative investments. To be more specific, we examine the signalling effects for the detection of speculative stocks in relation to the degree of their prior IPOs underpricing. We also employ the market-feedback hypothesis to investigate this signalling process. Our results reveal a significant positive relationship between the magnitudes of the IPO underpricing and the probability of an IPO firm being classified officially as speculative on the TOL. Furthermore, we find that a 6-month abnormal return after going public increases the probability of speculative dealing in the IPOs. Next, we consider all listed firms in the Thai stock market and highlight the role of both abnormal return and trading volume in the transmission of probability for appearing on the TOL. In addition, we find that IPOs and non-dividend paying companies further increase the risk of being on the TOL.
LanguageEnglish
Pages3067-3085
Number of pages19
JournalApplied Economics
Volume49
Issue number31
DOIs
StatePublished - 2 Dec 2016

Fingerprint

Turnover
Stock exchange
Thailand
Stock market
Abnormal returns
IPO underpricing
Pricing
Trading volume
Going public

Keywords

  • IPO Underpricing
  • signalling models
  • speculative stocks
  • Turnover List

Cite this

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abstract = "Using a unique data set from the Thai stock market about the so-called, ‘Turnover List (TOL)’ of speculative stocks spanning the period 2004–2012, we investigate and provide new evidence on the relationship between IPOs’ pricing effects and subsequent classification as speculative investments. To be more specific, we examine the signalling effects for the detection of speculative stocks in relation to the degree of their prior IPOs underpricing. We also employ the market-feedback hypothesis to investigate this signalling process. Our results reveal a significant positive relationship between the magnitudes of the IPO underpricing and the probability of an IPO firm being classified officially as speculative on the TOL. Furthermore, we find that a 6-month abnormal return after going public increases the probability of speculative dealing in the IPOs. Next, we consider all listed firms in the Thai stock market and highlight the role of both abnormal return and trading volume in the transmission of probability for appearing on the TOL. In addition, we find that IPOs and non-dividend paying companies further increase the risk of being on the TOL.",
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IPOs’ signalling effects for speculative stock detection: evidence from the Stock Exchange of Thailand. / Komenkul, Kulabutr; Sherif, Mohamed; Xu, Bing.

In: Applied Economics, Vol. 49, No. 31, 02.12.2016, p. 3067-3085.

Research output: Contribution to journalArticle

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