Determinants of Book Built IPO underpricingdifferential issue size and market momentum approach revisited
subject: differential issue size; firm size; listing day return; market momentum; underpricing
description: Pricing of an Initial public offering (IPO) is a complex phenomenon. Price anomalies are commonly observed in IPO markets, especially in emerging markets. Investors perceived underpricing creates undue market momentum during the offer period with an asymmetric effect across different issue sizes. This study examines the determinants of Book Built IPOs underpricing by considering a sample of 180 Book Built IPOs that went public in India between 2011 and 2020. The determinants were verified for differential issue size public offers. Listing day performance was measured using Listing Day-Absolute Return (LD-AR) and Listing Day-Market Adjusted Return (LD-MAR) models. Further, the data obtained was tested for the explanatory capabilities of firm-specific and market momentum factors for underpricing using OLS models. Concerning the differential issue size, the study found a direct relationship between the issue size and underpricing. Dominant underpricing was observed in the case of moderate to large issue size with a linear progressive return, confirming that there was over-optimism on the part of investors. The studys results also revealed that momentum-specific factors have a significant influence along with firm-specific factors such as firm size, cash flows, a subscription rate of QIBs and RIIs in the listing day return, and underpricing. 2023 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group.
creator: Suresha B; Nayak S.; Krishna T A; Thomas R.
source: Cogent Economics and Finance, Vol-11, No. 2
publisher: Cogent OA
date: 2023-01-01
rights: All Open Access; Gold Open Access
relation: ISSN: 23322039
format: Online
language: English
type: Article
coverage: Suresha B, School of Business and Management, CHRIST (Deemed to be University), Bangalore, India; Nayak S., School of Business and Management, CHRIST (Deemed to be University), Bangalore, India; Krishna T A, Department of Professional Studies, School of Commerce, Finance and Accountancy, CHRIST (Deemed to be University), Bangalore, India; Thomas R., Department of Professional Studies, School of Commerce, Finance and Accountancy, CHRIST (Deemed to be University), Bangalore, India