Abstract
The Initial Public Offering (IPO) underpricing in the stock market is considered an important factor to attract the investor towards the stock. In this study in addition to IPO the economic analysis of underpricing is investigated to examine economic effects of influencing factor of IPO underpricing in stock market of Pakistan for 98 listed companies taking their data for the period of 2013-2018. The findings of the regression analysis indicates that assets return, equities, earnings per share and profit margin are the important factors of IPO underpricing as there economic return to investor has significant, however, the effect of earning-price remains insignificant on IPO underpricing. The descriptive analysis of the study shows maturity of the selected variable and variance influencing factor indicates that the variables isn't multi-collinear with each other. The study concludes that impact of the liquidity level of IPO underpricing in the optional market would help the financial investors in strategizing their speculation through exchanging component.Keywords: Economic Analysis, Initial Public Offering Underpricing, Pakistan Stock MarketJEL Classifications: G12, G23, G32DOI: https://doi.org/10.32479/ijefi.10040
Highlights
AND SIGNIFICANCEThe initial or primary share that has been offered to investors or speculators for economic returns on their investment of capital is known as Initial Public Offering (IPO)
The results of descriptive statistics indicates that the initial returns of IPO Underpricing is positive as the mean, minimum and maximum values of IPO underpricing is positive, and the mean value is equals to 11.54% reveals an annual increase of approximately six percent
Correlation analysis The correlation analysis was done to examine the correlation of the regressors variables with IPO underpricing that either these variables have any successive correlation with dependent variables that may be useful for in future decision for the investors
Summary
AND SIGNIFICANCEThe initial or primary share that has been offered to investors or speculators for economic returns on their investment of capital is known as Initial Public Offering (IPO). The new established or those firms and industries that are running in lack of funds or aims to expand their business, production and capital offer IPO to investors. The IPO offering to general public is the most common financing way especially for private business firms and the investors invest the funds to earn lum-sum economic returns (Alok et al, 2016). The IPO underpricing is an important factors to attract new investor in open market organization aims to support the deficit financing by offering them some incentives for future returns on current investment. IPO underpricing refers to the offering of a company to generate funds for the 1st time to investors by a public stock offering. From IPO underpricing the firm’s aims to minimize the cost of their capital and at the same time gives some economic returns to investors. IPOs underpricing give a chance to investor to make a noteworthy position in a stock, something that would be as a rule more costly and set aside a long opportunity to perform in the secondary market (Binti et al, 2013)
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