IPO Underpricing and Accruals Quality: The experience of KONEX

We investigate the experience of KONEX Market, Korea’s alternative exchange market, influences IPO underpricing when they transfer to KOSDAQ Market. As KONEX requires firms to provide public information through Nominated Advisors, potential investors can acquire firms’ financial or business information more easily. Therefore, KONEX has the potential to reduce the level of information asymmetry between current and potential investors, thus reducing IPO underpricing. We find that KONEX Market experience reduces the magnitude of IPO underpricing. Furthermore, the effect of KONEX Market experience on IPO underpricing is larger when the firms have high accruals quality than the firms with low accruals quality.