Determinants of Initial Public Offerings: A Case from Indian Capital Market

Abstract

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 in formation 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 shares offered, issue size, market capitalization, subscription, offer timing, book building mechanism and IPO years 2006, 2009 & 2011 are found to have an important effect on the level of underpricing after the Indian market crisis. Nevertheless, firm's age, IPO year 2008, private issuing firm's, non institutional promoters, Indian promoters and non institutional non promoters contain no significant difference in the level of underpricing after-market crisis.