An Assessment of Valuation Methods of Stock Initial Public offerings on Tehran Stock Exchange

Abstract

Every day hundreds of companies all over the world are entering capital market for the first time by issuing stocks. By doing so, they decide to invest capital necessary for continuing activity and expanding operations accordingly. For this reason, it is important to the companies that price specified for their stock demonstrate real value of assets and their growth and development opportunities in the future. The purpose of this research is to study valuation methods of stock initial public offerings at the Tehran Stock Exchange. Population and study sample consisted of firms publicly offered their stocks for the first time at Tehran Stock Exchange during 2009-2014, and experienced no trading halt, i.e. 45 companies of which seven companies were eliminated due to lack of trading on the stock exchange and 38 firms were chosen. The research method is correlational-descriptive and the research is an applied research by purpose. The research is based on cross-sectional time regression analysis, for which simple multivariate regression estimation based on ordinary least square method was used, and models under consideration were examined by Eviews and SPSS. After analysis of results, the research findings showed that some variables such as firm size have no influence on the price of initial public offering but variables such as risk, size of initial offerings, amount of firm capital, etc. have significant effect on the price of stock initial public offering. In the end, it is recommended that companies price their stocks in the way that it paves the way for growth and development of their assets, given that there are a lot of factors and variables that affect the price of stock initial offering.