Evaluation of IPO Efficiency

This paper focuses on the study of factors that have influence on the IPO underpricing in Japan. The research is based on the data of Japanese companies that proceeded IPO between 2000 – 2017. We estimated 12 variables that could have influence on the degree of IPO underpricing in accordance with the literature review. We found that the average age of going public in Japan is 26 years and the older is the company, the less is the degree of IPO underpricing. We also revealed that the offering size, the range of the offer price, the amount of secondary shares, total assets, market conditions, duration of lockup period and financial crisis have significant influence on the level of IPO underpricing. Technological companies face the higher degree of IPO underpricing rather than others. Companies, going public in the period of “hot” market are more underpriced. In our research, we created a neural network (NN) that outperformed the results of statistical model. This NN can be used in future researches due to it’s better prediction power and simplicity of use.