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Acknowledgements: This research is supported by a grant from Hong Kong Baptist University and a departmental research grant from Hong Kong Polytechnic University (G-S 852). We are grateful to Ann Sherman for her valuable input to the research design and Castor Pang for his excellent research assistance. We also thank an anonymous referee and Jeffry Netter, the Editor, for their helpful comments. We are responsible for any remaining errors. JEL classification: G3


Asian initial public offerings (IPOs) require investors to pay subscription funds up-front upon submission of applications, and these funds are locked-up for one to three weeks without interest. Hence, the IPO process entails an explicit financing cost (opportunity cost) whether investors borrow funds or use their own funds to apply for IPO shares. The IPO subscription costs are not trivial, especially in a high interest rate environment or when an IPO is highly oversubscribed. These costs should be considered in any comparison of IPO returns across countries.


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