The Effect of KONEX Market Experience on IPO Performance
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[Purpose] On July 1, 2013, Korea Exchange (KRX) established Korea New Exchange (KONEX), a new stock exchange for start－up SMEs and venture companies. The KONEX market is aimed to help young SMEs with financing and development through the capital market. I investigate the impact of experience of Korea’s alternative exchange market, the Korea New Exchange (KONEX), on IPO performance when firms move their listing status from KONEX to the primary exchange market, Korean Securities Dealers Automated Quotation (KOSDAQ). As KONEX requires firms to provide public information through Nominated Advisors, investors can acquire firms’ reliable financial information more easily. Also, Korea Exchange enables KONEX firms to transfer their listing status from KONEX market to KOSDAQ market with eased requirements. It indicates that investors could have more prevailed information of the KONEX firms more easily before IPOs. [Methodology] Using 341 IPO firms (37 firms through KONEX) in KOSDAQ from 2014 to 2020, I investigate whether KONEX experience enhances IPO peroformance. More specifically, I investigate how KONEX experience affects the firms’ short－term and long－term IPO performance. [Findings] I find that KONEX Market experience has no effect on short－run performance of IPO. Rather, in 20 days and 30 days window, firms through KONEX market suffer more negative returns compared to firms directly listed on KOSDAQ. Expanding windows from short－run to long－run, I find that the firms with KONEX Market experience outperform to firms without that experience. [Implications] Therefore, this study provides the evidence that the firms with KONEX experience have better IPO performance in the long－run periods. In the short－run, KONEX firms are likely to be underperformed. It indicates that KONEX Market exposures reduce information asymmetry between investors. Also, it could be ‘Fast Track’ programs are well structured to provide opportunities to start－up or small－sized companies.
Abstract
[Purpose] On July 1, 2013, Korea Exchange (KRX) established Korea New Exchange (KONEX), a new stock exchange for start－up SMEs and venture companies. The KONEX market is aimed to help young SMEs with financing and development through the capital market. I investigate the impact of experience of Korea’s alternative exchange market, the Korea New Exchange (KONEX), on IPO performance when firms move their listing status from KONEX to the primary exchange market, Korean Securities Dealers Automated Quotation (KOSDAQ). As KONEX requires firms to provide public information through Nominated Advisors, investors can acquire firms’ reliable financial information more easily. Also, Korea Exchange enables KONEX firms to transfer their listing status from KONEX market to KOSDAQ market with eased requirements. It indicates that investors could have more prevailed information of the KONEX firms more easily before IPOs. [Methodology] Using 341 IPO firms (37 firms through KONEX) in KOSDAQ from 2014 to 2020, I investigate whether KONEX experience enhances IPO peroformance. More specifically, I investigate how KONEX experience affects the firms’ short－term and long－term IPO performance. [Findings] I find that KONEX Market experience has no effect on short－run performance of IPO. Rather, in 20 days and 30 days window, firms through KONEX market suffer more negative returns compared to firms directly listed on KOSDAQ. Expanding windows from short－run to long－run, I find that the firms with KONEX Market experience outperform to firms without that experience. [Implications] Therefore, this study provides the evidence that the firms with KONEX experience have better IPO performance in the long－run periods. In the short－run, KONEX firms are likely to be underperformed. It indicates that KONEX Market exposures reduce information asymmetry between investors. Also, it could be ‘Fast Track’ programs are well structured to provide opportunities to start－up or small－sized companies.
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