The area of overlap that we find is in maximizing the aftermarket performance of the company's share price which is a factor of good performance, appropriate IPO pricing and good liquidity in the aftermarket. Aftermarket liquidity is itself a function of the number of shares in issue, the number of markets on which the shares are traded, the amount of research coverage and number of market makers (where applicable) for the shares.

We find that IPOs in every country give investors in the offering an immediate positive return. On average, IPOs finish the first day of trading 16.6 per cent above the offering price (see Figure 1.2). ^[1] The pop ranges from a low of 5 or 6 per cent in Austria, Canada and Denmark to around 35 per cent in Sweden and Switzerland. The first-day premium is even higher in a number of emerging markets 257 per cent in China, 104 per cent in Malaysia and 47 per cent in Thailand (Loughran et al., 1994; updated by Ritter, 2001a). The existence of the first-day premium has exercised the minds of many leading academics and is known as the underpricing phenomenon. Although IPOs may appear to be underpriced, the issuer and its investment bank(s) price IPOs to open at a premium of between 10 and 15 per cent. That is they deliberately underprice issues by 10 to 15 per cent.

Figure 1.2: IPO one-day premia in selected major markets

This underpricing keeps everyone...