Determinants of IPO Underpricing on the Warsaw Stock Exchange

Abstract

Purpose – the objective of this paper is to provide evidence on the initial return (IR) of Initial Public Offerings (IPO) on the stock market in Poland and to identify determinants of the IPO initial returns on the Warsaw Stock Exchange (WSE) in the period between years 2005 and 2015. Design/Methodology/Approach – empirical analysis and regression results estimation based on informa-tion derived from databases such as: Bloomberg, Dealogic, and MergerMarket. Findings – the paper provides evidence for information asymmetry, behavioural as well as ownership and structure theories. The results identify six variables which have an impact on the degree of underpricing namely, involvement of PE and VC funds in the ownership structure of a company undertaking an IPO, new shares issued as a percentage of an IPO’s total proceeds, ex-ante uncertainty measured by Parkinson’s extreme value, an IPO price being set at the maximum of the bookbuilding range, turnover of shares traded during the debut date as well as the stock market return six months prior to an IPO. Originality/value – this paper contributes to the literature providing new evidence on a relatively little re-searched IPO underpricing phenomenon and determinants on the Polish stock market.