A B C D E F G H I J K L M N O P Q R S T U V W X Y Z All
Ray, Reshma Sinha
- Rationality Behind Short-Run Mispricing of IPOs in India
Authors
1 Indian Institute of Management Calcutta, IN
2 Department of Economics, University of Burdwan, IN
Source
Indian Journal of Economics and Development, Vol 6, No 8 (2018), Pagination: 1-8Abstract
Objectives: The study examines the nature of pricing of IPOs in the Indian primary market over the last one and half decades (2000-01 to 2015-16). Further, we have tried to explain the rationality behind mispricing of IPOs in terms of general stock market movements. To be specific, the focus is on how does the prior general stock market behavior affects pricing of IPOs.
Methods: We have collected data through different sources, like, prime database, the official websites of BSE and NSE. For the purpose of evaluating the objectives of the study, ordinary least square (OLS) method is used to estimate parameters. In this context, two opposite situations of market (i.e., positive reactions and negative reactions) are used to predict the average return of IPOs. In addition, some descriptive statistical techniques of data analysis were also applied in our study to analyze data and draw conclusions.
Findings: It is seen that like the evidences of the developed market and other emerging markets IPOs are also underpriced in India. Like developed market in India also the book building method is gaining importance over the years. Interestingly, it is found that if market return reacts positively prior to issuance of IPOs average underpricing would be higher compared to the alternative situation. However, from the results of the estimated analysis, it is documented that general stock market movements do not have any significant role in explaining underpricing of IPOs in India.
Applications: From the estimated results of the study, it is apparent that underpricing of IPOs is persistent in India immediately after listing. Further, it is also appeared that unlike developed markets, in India prior stock market movements does not have any significant role in explaining underpricing phenomenon.
Keywords
IPOs, Book-Building, General Stock Market Movements, Global Economic Meltdown.Full Text
References
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- Role of Uncertainty in Explaining Underpricing of IPOs in Emerging Market
Authors
1 Department of Economics, Sister Nivedita University, IN
2 Department of Economics, University of Burdwan, IN
Source
Indian Journal of Economics and Development, Vol 7, No 3 (2019), Pagination: 1-7Abstract
Objectives: The study examines the role of uncertainty in explaining underpricing (i.e., over performance) of IPOs immediately after listing in the context of the Indian IPO market over the study period 2000-01 to 2015-16.
Methods: We have collected data through different sources, like, Prime Database, CMIE Prowess, the official websites of BSE and NSE. For the purpose of evaluating the objectives of the study, ordinary least square (OLS) method is used to estimate parameters.
Findings: The study shows that there is a monotonic relationship between uncertainty among investors regarding the firm value and underpricing of IPOs. We see that the small issues being speculative are associated with higher uncertainty. Further, it is also observed that the degree of uncertainty is higher in the period of economic meltdown compared to the normal period.
Applications: From the estimated results of the study, it is apparent that underpricing of IPOs is persistent in India immediately after listing. Further, it is also appeared that uncertainty is deep-ischolar_mained with information asymmetry. Higher the degree of information asymmetry among the investors higher will be the underpricing of IPOs.
Keywords
Uncertainty, Investors, Underpricing of IPOs, Indian IPO Market.Full Text
References
- K. Rock. Why new issues are underpriced? Journal of Financial Economics. 1986; 15(1-2), 187-212.
- J.G. Mcdonald, A.K. Fisher. New issue stock price behaviour. The Journal of Finance. 1972; 27(1), 97-102.
- D.E. Logue. On the pricing of unseasoned equity issues: 1965-1969. Journal of Financial and Quantitative Analysis. 1983; 8(1),91-103.
- R.G. Ibbotson, J.F. Jaffe. Hot issue markets. Journal of Finance. 1975; 30(4), 1027-1042.
- R.G. Ibbotson. Price performance of common stock new issues. Journal of Financial Economics. 1975; 2(3),235-272
- J.R. Ritter. The hot issue market of 1980. Journal of Business. 1984; 57,215-240
- A. Shah. The Indian IPO market: empirical facts. Centre for Monitoring Indian Economy. 1995.
- J.R. Ritter. The cost of going public. Journal of Financial Economics. 1987; 19,269-281.
- M.S. Narasimhan, L.V. Ramaana. Pricing of initial public offerings: Indian experience with equity issues. ICFAI Journal of Applied Finance. 1995; 26-39.
- S.S.S. Kumar. Short and long-run performance of book built IPOs in India. International Journal of Management Practices & Contemporary Thoughts. 2007; 2(2), 20-29.
- K.S. Kumar. Short run and long run performance of Indian initial public offerings (IPOs) during 2007-2012. International Journal of Research and Development - A Management Review. 2015; 4 (3),34-41.
- A. Bhattacharya, B.B. Chakrabarti. An examination of adverse selection risk in Indian IPO after-markets using high frequency data. International Journal of Economic Sciences. 2014; 3(3),1-49.
- T.P. Madhusoodanan, M. Thiripalraju. Underpricing in initial public offerings: the Indian evidence. Vikalpa: The Journal for Decision Makers. 1997; 22(4), 17-30.
- A. Pandey. Initial returns, long run performance and characteristics of issuers: differences in Indian IPOs following fixed price and book building processes. 1995.
- A.K. Mishra. Underpricing of initial public offerings in India: a comparison of the book-building and fixed-price offerings. IMJ. 2010; 2(2), 37-54.
- R.P. Beatty, J.R. Ritter. Investment banking, reputation, and the underpricing of initial public offerings. Journal of Financial Economics. 1986; 15(1-2), 213-232.