Determinants of Underpricing of Initial Public Offerings-An Evidence from India (original) (raw)
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Underpricing of initial public offerings in India
Investment management & financial innovations, 2017
This study attempts to provide new evidence on the first day IPO market performance using a set of 235 IPOs newly listed between April 1, 1997 and March 31, 2008 on the Indian Stock Exchange. The study examines how a change in the institutional arrangements that govern the pricing of IPOs, from the traditional fixed price approach to the building of a book, affects the level of underpricing. It also extends the literature on underpricing by comparing underpricing under the two pricing methods. The study adds new evidence to the existing literature on IPOs in a significant manner. Firstly, in consistence with the ‘hot issue markets’ theory (Ibbotson and Jaffe, 1975; Ritter, 1984), it highlights that on the main board of the Indian Exchange, IPO underpricing increased in 2007. The empirical findings indicate a significantly mean positive underpricing (14.45 %); nonetheless, 60% of IPOs in the sample are initially overpriced. Secondly, in contrast with Giudici and Paleari (1999), the s...
2016
This study has examined the IPO performance in India from 2007 to 2013. Results show that under-pricing exists in the first day of trading during the particular period, but results show that the degree of under-pricing is dramatically decreased in comparison with what is shown in previous studies. The study finds that the IPOs are influenced by its issue variables. The face value of the shares and oversubscription subscription of the share are highly affected factor for underpriced in initial day of listing. After 36 months of listing the IPOs are underperformed by 29.06 percent and market capitalisation of the firm, issue premium of the share, face value of the share, issue price, and oversubscription of IPOs are highly influencing IPOs performance in long run. The study has considered 146 companies for identifying the factors influencing the Initial Public Offerings (IPO) in the Bombay Stock Exchange (BSE), India. KEywORDS: Face Value, India, Initial Public Offering, Issue Size, O...
International Journal of Corporate Finance and Accounting, 2016
This study has examined the IPO performance in India from 2007 to 2013. Results show that under-pricing exists in the first day of trading during the particular period, but results show that the degree of under-pricing is dramatically decreased in comparison with what is shown in previous studies. The study finds that the IPOs are influenced by its issue variables. The face value of the shares and oversubscription subscription of the share are highly affected factor for underpriced in initial day of listing. After 36 months of listing the IPOs are underperformed by 29.06 percent and market capitalisation of the firm, issue premium of the share, face value of the share, issue price, and oversubscription of IPOs are highly influencing IPOs performance in long run. The study has considered 146 companies for identifying the factors influencing the Initial Public Offerings (IPO) in the Bombay Stock Exchange (BSE), India.
UNDER-PRICING OF INITIAL PUBLIC OFFERINGS IN INDIAN CAPITAL MARKETS
IAEME PUBLICATION, 2021
This study looks at the underpricing of IPO in the Indian stock exchanges. We look at a sample of 186 stocks listed in the National stock exchange between the year 2010 to 2020 for evidence of Underpricing in the Indian capital markets. Our Findings provide evidence that underpricing continues in the Indian stock market. On an average the underpricing in the IPO’s is 19.7% on the listing day and the underpricing persists for the next 30 days and even after 30 days the underpricing is 17%.
Research on Underpricing Concept of IPO (Initial Public Offering) in Indian Stock Market
International Journal of Innovative Technology and Exploring Engineering, 2019
There are several ways of raising funds from primary market but, IPOs are the widely adopted tool by the companies to raise funds from open market for the initial sale of stock by private company. India being a developing nation and flourishing corporate network is focused on IPO. The motivation behind this examination is to understand the case of underpricing exists to think about whether or not an Indian IPO and the impact of the administrative system on IPO underpricing. In this examination enterprise information is broken down by descriptive and comparative method. Indian market has more underpricing than overpricing.
Paripex Indian Journal of Research, 2013
Many studies have documented that Initial Public Offerings (IPOs) of equity are substantially underpriced. This paper provides evidence on comparison of under pricing in India with the help of the whole population of firms that went public between 2004 and 2008. Since the Indian economy was liberalized in the early ‘90s, India has seen a tremendous growth of its capital markets with close to 5,000 Initial Public Offerings (IPOs), second only to the United States of America. It is found that a significant number of companies earn large positive returns on the first day of listing. It is reported that on an average the Indian IPOs are underpriced to the tune of 32.30 per cent on the listing day. It has been found that the positive initial return persists for 72.92 per cent of the total IPOs. Descriptive Statistics like Mean, Median and Standard deviation and interferential test like Kruskal Wallis and Mann Whitney U test have been used for comparison of IPOs based on their IPOs issue size, based on their sector, based on type of ownership, based on type of activity period and based on year of issuance. Evidence is found that, underperformance is not influenced by offer size, sector, ownership and timing of issue. Whereas, under performance is influenced by Year of issuance.
Determinants of underpricing of IPO – A case study of Indian stock market
2021
The study aims to investigate the reasons of Under-pricing of IPO by analyzing the impact of various factors like Issue Size, Stockholder Ownership Structure and Underwriter Reputation on the Under-pricing of IPOs. The target market chosen was all the IPOs issued In the Indian Stock Market from the Year 2010 to 2019 i.e., 219 Companies, which included 88 Underpriced IPOs and 131 Overpriced IPOs. Initially, exploratory research was undertaken to probe deeper into the topic. After conducting the exploring research, causal research was finalized as the most suitable method to go ahead with. We analyzed the data using tools like Correlation and Regression on various software i.e., Excel and SAS (Enterprise Guide). We concluded the Research by stating a Negligible Positive Relationship of Under-pricing of IPO with Issue Size and a Strong Positive Relationship with QIB and HNI Ownership and a negative Relationship with Retail Investors and Reputation of Underwriters.
IPOS UNDERPRICING AND MONEY “LEFT ON THE TABLE” IN INDIAN MARKET
indusedu.org
This paper attempts to design for and tests empirical models, which integrate theoretical, institutional, and other factors, which interact to explain ownership structure, Ex-ante information at the level of underpricing succeeding the Indian stock market crunch. The study is based on IPO that listed at Bombay stock exchange given that April-2000 to Dec-2011. Multiple linear regressions are used to distinguish the relationship between various independent variables with the dependent variable, i.e. level of underpricing. The outcomes of multiple regressions reveal that, Firm's age, IPO years, book building pricing mechanism, ownership structure, issue size, & market capitalization explained 44% of the variation in issuer underpricing, Durbin Watson's value subsisted 1.58. Which indicates that, there is positive sequential relationship between variables? Number of share offered, issue size, market capitalization, subscription, offer timing, book building mechanism and IPO years 2006, 2009 & 2011 is constructed to be a important effect on the level of underpricing after the Indian market crisis. Nevertheless, firm's age, IPO year 2008, private issuing firms, non institutional promoters, Indian promoters and non institutional non promoters contain no significant difference in the level of under pricing after-market crisis.
“PRICING MECHANISM AND EXPLAINING UNDERPRICING OF IPOS”: EVIDENCE FROM BOMBAY STOCK EXCHANGE, INDIA
mairec.org
Introduction: In 1999, investment banks were allowed to use a version of book building as a mechanism for bringing IPOs to the Indian capital market. Book building refers to the process of generating, capturing, and recording investor demand for shares during an IPO in order to support efficient price discovery. A second method, in which the company itself fixes the price, is known as the fixed-price method. The literature on IPO underpricing is extensive. However, few studies examine the effect of book building on underpricing. Comparing book built with fixed price IPOs, they found that underpricing is more in book built issues in all countries. Recent researches on IPOs have focused on difference in pricing mechanism across countries. Objectives: The paper attempts to analyze that whatever there is any significant difference in the magnitude of level of underpricing of ipos that priced through book build with those that are priced through the fixed price option. Research Methodology: A total of 619 IPOs were listed in Indian capital market from 2000-2011. At Bombay stock exchange a total of 550 IPOs were listed from 2000-2011. The sample for the study consists of these 550 IPOs, IPOs were priced through book built & Fixed price option. Out of 550 IPOs 405 (73.13%) through Book build and 145 (26.87) were issued through fixed price option. In the study offer price and 1 st day closing price is used to calculate underpricing. And Mean is used to magnitude the level of underpricing. Findings: As far as magnitude of underpricing is concerned, the book-build and fixed price option gave different results. We found significant difference in level of magnitude of underpricing in IPOs that priced through book build with those that are priced through the fixed price option.