The Effects of Removing Price Limits and Term Structure upon Order-Submission Behaviors of IPOs

This paper analyzes the effects of removing price limits and term structure upon order-submission behaviors in IPOs. Many Emerging markets impose limits on trading prices within a trading day to prevent the market from overreaction, especially in IPOs market. With a sample of Taiwan IPOs, the deregulation of price limits in first five trading days offers us an opportunity to insight into how the price limits affect investors' order behaviors. Besides, two anomalies in the pricing of IPOs are well documented: the short-run underpricing and the long-run overpricing phenomenon. Thus, we propose the term structure effect on order-submission behaviors similar to pricing behaviors in different periods and then examines above effect how to affect order-submission behaviors . Our findings are: (1) the previous information indicators of limit order book significantly affect order aggressiveness of market participants in IPOs market; (2) the term factor slightly affect order submission behaviors; (3) removing price limits decreases the degree of relationship between information contents and order aggressiveness.