The Pricing and Underwriting Costs of Japanese REIT IPOs

This study investigates 40 Japanese REIT IPOs during 2001 to 2006 and finds evidence that higher final offer prices are reflected in higher underpricing levels by such IPOs. There is also some evidence that suggests the engagement of one of the big 3 Japanese underwriting firms suggests less money is left on the table. Economies of scale in underwriting fees for Japanese REIT IPOs are also found. Specifically, the percentage underwriting fees decrease with higher amounts of equity capital sought but that the percentage fee decreases at a diminishing rate.