Abstract
This paper attempts to design and test empirical models, which integrate theoretical, institutional, and other factors, which interact to explain ownership structure. Ex-ante information at the level of under-pricing succeeds the Indian stock market crunch. The study is based on IPO that listed at Bombay stock exchange given that April 2000 to December 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 under-pricing, Durbin Watson’s value subsisted 1.58, which indicates that, there is a positive sequential rela-tionship between variables. Number of share offered, issue size, market capitalization, subscription offer timing, book building mechanism and IPO years 2006, 2009 & 2011 are constructed to have important effect on the level of underpricing after the Indian market crisis. Nevertheless, firm’s age, IPOs year 2008, private issuing firms, non institutional promoters, Indian promoters and non institutional non promoters contain no significant difference in the level of underpricing after-market crisis.
Highlights
Initial public offerings (IPOs) have generated an enormous amount of public interest and are one of the most researched areas in finance
There is a significant relationship between initial public offerings (IPOs) years (2006, 2009 & 2011) and the level of underpricing at 5% significance level (z-value = −1.79, −1.92 & 1.69)
This examined that IPO year (2006, 2009) has an important negative effect on the level of underpricing
Summary
Initial public offerings (IPOs) have generated an enormous amount of public interest and are one of the most researched areas in finance. Common empiricisms have shown that IPOs are subject to three well documented anomalies, namely, the short-term underpricing of IPOs, the hot issue market phenomenon and the long-run performance of IPOs. With regard to short-term underpricing, issuers offer shares to investors at prices considerably below the subsequently revealed market value. The underpricing of IPOs seems to be persistent in most markets. It would be difficult to rationally justify the behavior of living owners to sell shares to outsiders at discounted prices. The fact that these anomalies exist in numerous developed and developing markets makes them even more difficult to explain
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