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The University of Southampton
Centre for Risk Research

Risk Factor and use of proceeds declaration and their effects on IPO subscription, price "fixings", liquidity and after-market returns. Event

Professor Paul McGuinness
23 August 2018
Room 3007, Building 4, Highfield Campus

Event details

Centre for Risk Research Seminar with speaker Professor Paul McGuinness


This paper focuses on two important areas of voluntary disclosure in IPO issue documents: (1) The risk factors surrounding a listing entity’s business and offer characteristics and (2) an issuers planned used of proceeds. Issuers assigning a greater fraction of proceeds to investment (debt repayment) generate higher (lower) subscriptions rates and price “fixings”, as well as strong (weaker) after-market liquidity and initial returns. Additionally, greater assignment of issue proceeds to investment (debt repayment) uses supports (weakens) longer-run returns. For risk disclosures, greater enumeration of issue-based factors inflates after-market volatility levels but exerts little to no influence on investor subscription rates and initial price “fixings”. However, greater enumeration of business- and global risk factors bears little influence on IPO pricing, demand or liquidity, but correlates with significantly weaker longer-run returns, as visible at one- to three-year horizons. This study also examines the determinants of risk factor and fund declarations. Underwriter prestige figures as a major determinant of both. Specifically, issue-based, business- and global risk factor enumerations and debt repayment amounts are all increasing in underwriter quality levels. Finally, little difference exists between state sponsored and privately-backed IPOs for the two voluntary disclosure areas considered.

Speaker information

Professor Paul McGuinness,Department of Finance, The Chinese University of Hong Kong (UCHK),Paul McGuinness is a Tenured Professor in the Department of Finance at The Chinese University of Hong Kong (CUHK), having served as Department Chairman for two four-year terms (August 2000 - July 2004; August 2005 - July 2009). Prior to appointment at CUHK, he was a faculty member of the School of Industrial and Business Studies at the University of Warwick (UK). He has also held, while on sabbatical leave from CUHK, positions as the National Bank Chair of Finance at the Victoria University of Wellington, New Zealand (January - December 1996), Head of Research at the Hong Kong securities regulator, the Securities and Futures Commission (June - December 2000) and Visiting Professor in the Department of Economics at Macquarie University in Sydney, Australia (mid-February - June 2008). His teaching experience is diverse, covering undergraduate, graduate and executive programmes in the UK, Hong Kong, Mainland China, New Zealand and Australia. His research focus, in financial markets/corporate finance, has led him to publish more than 45 internationally-refereed journal articles and a widely-regarded book (A Guide to the Equity Markets of Hong Kong, Oxford University Press, 1999). He has also conducted consultancy work in securities market-related issues in Hong Kong and Mainland China.

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