Explaining over-subscription in fixed-price IPOs - Evidence from the Malaysian stock market

This paper examines the link between over-subscription and pre-listing information in fixed-price IPOs. We find a strong negative relation between investors' opportunity cost of fund and over-subscription. Since investors are required to make upfront payment at the time of IPO applications, lengthy offer period increases investors' opportunity cost of fund and thus reduces their interests in the IPOs. To increase over-subscription, firms should time their IPOs to coincide with periods of large positive initial returns and low volume of IPO activity. We find that over-subscription is negatively correlated with offer price but is not significantly related to issue size.