The tender system - reduces underpricing and increases market efficiency

Abstract

This report presents the empirical findings on the efficacy of the dual-tranche system of share flotation and/or the newly introduced "when-issued" market in increasing the proceed from new issues, reducing underpricing and improving market efficiency in Singapore. Results showed that issuers indeed raised reasonably more money on a per share basis and underpricing was reduced in the tender tranche as a consequence. Tests for market efficiency indicated that the weighted-bids does not provide significant insight into an issue's probable short-run equilibrium price while "when-issued" trading has helped to improve market efficiency.