STOCK MARKET CRISIS AND IPOS UNDERPRICING: EXPERIENCE FROM INDIAN STOCK MARKET

Rohit Bansal, Ashu Khanna
2012 International Journal of Accounting and Financial Management Research   unpublished
Initial public offer (IPOs) is a prominent milestone in the life cycle of a firm and has a significant effect on the firm's performance. Worldwide, underpricing is one of the most observed anomalies in the new issue market. In this paper, we describe the impact of Indian stock market crisis on initial performance of IPO underpricing and to examine the changes occurs, due to the market crisis. We composed variables the likes of firm's age, issue size (total amount to be raised), market
more » ... tion, subscription rate, number of shares offered to investor's and pricing mechanism (dummy variable). This paper attempts to explore the relationship between the dependent variables underpricing of an issue and firm's age, issue size (total amount to be raised), market capitalization, subscription rate and number of shares offered to investor's and pricing mechanism. We determine 51.4% R square & 43.3% adjusted R square. However, Durbin-Watson has given 1.793 values, which indicate there is no serial autocorrelation & hetroscadisticity problem exist in the regression model. We encounter that market capitalization; number of shares offered to investor's and issue size is significant affecting level of underpricing. Issue size & number of shares offered is found to be negative affecting underpricing. Market capitalization is found to be positive relationship with underpricing. However, firm's age, subscription rate and pricing mechanism is not significant relative with underpricing.
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