• Bookbuilding;
  • Dynamic information acquisition hypothesis;
  • IPO underpricing;
  • Premarket information;
  • Price update;
  • Regulatory change of 2007


Using unique initial public offering (IPO) bookbuilding datasets, we examine how premarket auctioning activities, measured using oversubscription and institutional bids, affect the price-setting practices of underwriters in Korean IPOs. Three key findings emerge. First, final offer prices are set higher when institutional investors consider IPOs more favorably and thus bid more aggressively. Next, IPO underpricing increases with oversubscription and institutional bids increase with positive pricing information. Finally, the enhanced discretion over pricing of IPO shares prompted by the regulatory change in 2007 improves the efficacy of the IPO pricing processes by inspiring institutional investors to reveal their positive information more willingly.