Clustering and discounting in auction-style SEOs – Evidence from China

Jinzhao Liu; Shenghao Gao; Jun Zhou

doi:10.1016/j.pacfin.2019.101197

Clustering and discounting in auction-style SEOs – Evidence from China

Jinzhao Liu, Shenghao Gao, Jun Zhou

Rowe School of Business

Research output: Contribution to journal › Article › peer-review

3 Citations (Scopus)

Abstract

This study examines the clustering and discounting of offer prices in auction-style seasoned equity offerings (SEOs) in China. More importantly, using a unique dataset of detailed bidding data submitted by participating investors in SEOs using the uniform-price auction mechanism, we document the clustering of bid prices at integers, and find that the clustering and discounting of integer bid prices drive the clustering and discounting of integer offer prices. Further, we find evidence that bid prices tend to cluster at integers for SEOs with higher uncertainty, and the larger bid discounts associated with integer bids can be explained by bid shading.

Original language	English
Article number	101197
Journal	Pacific Basin Finance Journal
Volume	57
DOIs	https://doi.org/10.1016/j.pacfin.2019.101197
Publication status	Published - Oct 2019

Bibliographical note

Funding Information:
We thank Jun-Koo Kang (the Editor) and an anonymous referee for their valuable comments and suggestions. Gao acknowledges the financial support from the Foundation of Youth for Humanity and Social Sciences from the Ministry of Education of China (Grant no. 16YJC630024 ), the National Natural Science Foundation of China (Grant no. 71572009 and 71872010 ) and the Fundamental Research Funds for Central Universities (Grant no. 2019JT004 ).

Publisher Copyright:
© 2019

ASJC Scopus Subject Areas

Finance
Economics and Econometrics

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10.1016/j.pacfin.2019.101197

Cite this

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title = "Clustering and discounting in auction-style SEOs – Evidence from China",

abstract = "This study examines the clustering and discounting of offer prices in auction-style seasoned equity offerings (SEOs) in China. More importantly, using a unique dataset of detailed bidding data submitted by participating investors in SEOs using the uniform-price auction mechanism, we document the clustering of bid prices at integers, and find that the clustering and discounting of integer bid prices drive the clustering and discounting of integer offer prices. Further, we find evidence that bid prices tend to cluster at integers for SEOs with higher uncertainty, and the larger bid discounts associated with integer bids can be explained by bid shading.",

author = "Jinzhao Liu and Shenghao Gao and Jun Zhou",

note = "Funding Information: We thank Jun-Koo Kang (the Editor) and an anonymous referee for their valuable comments and suggestions. Gao acknowledges the financial support from the Foundation of Youth for Humanity and Social Sciences from the Ministry of Education of China (Grant no. 16YJC630024 ), the National Natural Science Foundation of China (Grant no. 71572009 and 71872010 ) and the Fundamental Research Funds for Central Universities (Grant no. 2019JT004 ). Publisher Copyright: {\textcopyright} 2019",

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Clustering and discounting in auction-style SEOs – Evidence from China

Abstract

Bibliographical note

ASJC Scopus Subject Areas

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