Examining Underpricing in Initial Public Offering: Deepening Insights on Non-Financial Information

PurposeThis study aims to investigate the impact of facial-based perceived trustworthiness on stock valuation, particularly, in the initial public offering (IPO). IPO settings provide the opportunity to investigate whether information asymmetry resulting from company newness in the market would influence the incorporation of soft information in the form of executive facial trustworthiness in stock valuation.Design/methodology/approachWe use a recent machine learning algorithm to detect facial landmarks and then calculate a composite facial trustworthiness measure using several facial features that have previously been observed in neuroscience and psychological studies to be the most determining factor of perceived trustworthiness. We then regress the facial trustworthiness of IPO firm executives to IPO underpricing.FindingsUtilizing machine learning algorithms, we find that the facial trustworthiness of the company executive negatively impacts the extent of IPO underpricing. This result implies that investors incorporate the facial trustworthiness of company executives into stock valuation. The IPO underpricing also shows that the cost of equity is higher when perceived trustworthiness is low. With regard to the higher information asymmetry in IPO transactions, such a negative impact implies the role of facial trustworthiness in alleviating information asymmetry.Originality/valueThis study provides evidence of the impact of top management personal characteristics on firms’ financial transactions in the Indonesian context. From the perspective of investors and other fund providers, this study shows evidence that heuristics still play an important role in financial decision-making. This is also an indication of investor reliance on soft information. Our research method also provides a new opportunity for the use of machine-learning algorithms in processing non-conventional types of data in finance research, which is still relatively rare in emerging markets like Indonesia. To the best of our knowledge, our study is the first to use personalized measures of trust generated through machine-learning algorithms in IPO settings in Indonesia.

The purpose of this study is to determine the influence of corporate governance structure on underpricing in companies that conduct Initial Public Offering (IPO) on the Indonesia Stock Exchange, as well as to determine the reputation of underwriters moderating the influence of corporate governance structure on underpricing. The research method used is quantitative method. The population in this study was 218 companies and the sample obtained after using purposive sampling was 167 companies. Data analysis techniques in this study are descriptive statistical analysis, classical assumption test, multiple linear regression analysis, and hypothesis test using EViews 12 software. The results of this study show that the size of the board of commissioners has a negative and significant effect on underpricing. Meanwhile, the independence of the board of commissioners and institutional ownership do not have a significant effect on underpricing in companies that conduct an Initial Public Offering (IPO) on the Indonesia Stock Exchange. It can be concluded that the reputation of the underwriter is unable to moderate the influence of the size of the board of commissioners, the independence of the board of commissioners, and institutional ownership on underpricing. In addition, an Adjusted R-squared value of 0.078222 means that 7.82% of the underpricing rate is influenced by the size of the board of commissioners, the independence of the board of commissioners, institutional ownership, and the reputation of underwriters, while the rest is influenced by other variables that are not included in this study.

Company size, and managerial ownership on company value after Initial Public Offering (IPO) among property sector companies listed on the Indonesia Stock Exchange from 2019 to 2022. When a company has capital, it has a significant opportunity for expansion to create value growth for the company. The funding obtained at the IPO or its proceeds is determined based on underwriter arguments to establish the company's value according to the reflected information for profit. The ratios used in this research are Financial Performance, Dividend Policy, Company Size, and Managerial Ownership. The research methodology employed in this study is quantitative research, and data collection techniques consist of collecting, recording, and analyzing secondary data in the form of financial reports from property sector companies published by the Indonesia Stock Exchange through its website from 2019 to 2022. The sample in this research was selected using purposive sampling, resulting in a sample of 11 property companies that meet the sample criteria. The data analysis method used is multiple linear regression analysis, and the testing is conducted both partially and simultaneously. The results of this research indicate that financial performance, dividend policy, company size, and managerial ownership do not significantly influence the company's value after IPO. However, when considered simultaneously, financial performance, dividend policy, company size, and managerial ownership collectively influence the company's value after IPO

<p class="Bab">This study aims to analyze the effect of shariah compliance status, and information asymmetry as a proxy for institutional ownership variables, and company size on excess demand in initial public offerings on the Indonesia Stock Exchange. This study uses 51 companies that conduct initial public offerings on the Indonesia Stock Exchange as research samples obtained through purposive sampling method. The research method used in this study is a quantitative method with secondary data. The analytical tool in this research is IBM SPSS version 28 using classical assumption detection in the form of normality detection, heteroscedasticity detection, autocorrelation detection, and multicollinearity detection. This study also used multiple regression analysis and hypothesis testing using t test, F test and coefficient of determination test. The results of this study show that shariah compliant status does not affect excess demand in initial public offerings, while for institutional ownership variables positively and significantly affects excess demand in initial public offerings and company size negatively and significantly affects excess demand in initial public offerings on the Stock Exchange Indonesia.</p>

This study aims to determine the effect of financial information, non-financial information, and macroeconomic conditions on the level of underpricing. The research variables used are financial information variables (Return on Assets and Debt to Equity Ratio), non-financial information variables (company size and company age), and macroeconomic conditions variables (inflation and interest rates). This study is a quantitative study using multiple linear regression analysis methods. The population of this study were companies conducting Initial Public Offerings (IPOs) on the Indonesia Stock Exchange (IDX) in 2018-2022, totaling 273 companies and a sample size of 235 companies selected using the purposive sampling method. The results of the study showed several results, including (1) financial information variables (ROA and DER) did not affect the level of underpricing in companies conducting IPOs on the IDX in 2008-2022; (2) non-financial information variables show different results in their influence on the level of underpricing where company size influences the level of underpricing, while company age does not have a significant effect on the level of underpricing; (3) macroeconomic condition variables also show different results in their influence on the level of underpricing where inflation has no effect and interest rates influence underpricing.

This study was conducted to prove the influence of eps, proceeds, and underwriter reputation to the underpricing in companies doing an IPO (Initial Public Offering) in the period from 2011 to 2013. The study use secondary data obtained from Indonesian Stock Exchange (ISE) website and the annual financial statements that audited and published. Population in this research is Initial Public Offering (IPO) companies listed in Indonesian Stock Exchange (ISE) in the period 2011-2013. Sampling technique using purposive sampling method, and obtained a sample 0f 60 IPO and Underpricing companies. Data analysis technique use is multiple linear regression analysis. Hypotesis testing is done by using the F test statistics and t test statistics with a confidence level of 5%. The results showed that EPS, Proceeds, Underwriter Reputation simultaneously influence on Underpricing. Then, the results showed that only Proceeds has negative influence on Undepricing. While Earning Per Share (EPS) and Underwriter Reputation has no influence on Underpricing.

The purpose of this study is to obtain empirical evidence of the influence of auditor reputation and the effect of underwriter reputation on medium-sized companies that conduct initial public offerings. This research was conducted on 190 companies experiencing underpricing listed on the Indonesia Stock Exchange (IDX) for the 2016-2021 period, the research data used in this study is secondary data. The number of samples analyzed was 130 development board companies and experienced underpricing because companies that met the sample criteria. The analytical technique used in this study was Multiple Linear Regression Analysis. The results of the study prove that underwriter reputation has a negative influence on underpricing of medium-sized companies that conduct initial public offerings. The reputation of the auditor has no effect on the underpricing of medium-sized companies that make this initial public offering on the IDX.

The purpose of this study was to analyze the effect of financial and non-financial information on initial returns on the Indonesia Stock Exchange. Financial information in this study is measured by the variables of earnings per share, debt to equity ratio, return on assets, the proportion of old shareholder ownership, and price earning ratio. Non-financial information is measured by variables of auditor reputation, underwriter reputation, and company age. The data collection method used purposive sampling. The number of research samples is 52 companies that experience underpricing when conducting initial public offerings listed on the Indonesia Stock Exchange in 2015-2018. The analytical tool used is multiple linear regression analysis using SPSS 25 analysis tool. The results show that earnings per share, return on assets, the proportion of old shareholder ownership, underwriter reputation, and company age have a significant effect on initial return. Meanwhile, debt to equity ratio, price earning ratio, and auditor reputation have no effect on initial return.

This research seeks to determine the impact of investor sentiment and market volatility on IPO initial return when an issuer conducts an Initial Public Offering (IPO). This research lasted ten years, from 2009 to 2020, with a total issuer of 237 conducting Initial Public Offerings (IPOs) on the Indonesia Stock Exchange. The total number of issuers conducting an initial public offering (IPO) met the purposive sampling criteria is 285. Multiple linear regression analysis, with control variables such as Gap of Days, Firm Age, IPO Size, and Firm Size, is used to determine the effect of Investor Sentiment and Market Volatility on IPO Initial Returns. The findings showed that Investor Sentiment and Market Volatility positively affected the IPO Initial Return during the study period. This research aims to increase investor awareness of the importance of IPO stock price, increasing the initial return in the future. In Indonesia, Otoritas Jasa Keuangan (OJK) plays a critical role in policies that facilitate Indonesian investors' monitoring of the volatility of stock price changes in the market.JEL: M2, M21

Although previous studies suggest that Australian resources sector firms operate in an information asymmetric environment, few empirical works investigating the determinants of firms’ information asymmetry and performance at initial public offering (IPO) have been identified. This is despite the sector’s important contribution to Australia’s gross domestic product (GDP) and employment. A better understanding of how resources sector IPOs are evaluated should aid stakeholders in making sound investment decisions. This thesis investigates the influence of IPO signals on analyst perceptions of information asymmetry, attractiveness of IPO and expected underpricing associated with Australian resources sector IPOs. It draws on the literature from signalling theory, reputational capital, IPO, and behavioural finance in developing its theoretical framework. A mixed-method research approach incorporating quantitative data collected through a completely-crossed factorial experiment and qualitative data collected through semi-structured interviews was used to achieve this thesis’ research objectives. The results indicate retained ownership proportion and underwriter reputation weighted relatively higher in influencing information asymmetry. Underwriter reputation, retained ownership proportion, and independent geologist reputation signals significantly influenced attractiveness of IPO. Investigating accountant reputation signal had the lowest relative influence on attractiveness of IPO. Only underwriter reputation and retained ownership proportion significantly influenced analyst perceptions of expected underpricing. There was a significant positive relationship between retained ownership proportion and expected underpricing implying increased issuers’ opportunistic behaviours at IPO (Bruton, Chahine & Filatotchev 2009; Robinson, Robinson & Peng 2004). The findings imply that Australian resources sector issuers should allocate relatively more funds to hiring a reputable underwriter as this is the most influential and informative IPO signal, holding retained ownership proportion constant. Significant interaction effects between the IPO signals revealed that participants processed cues configurally. Contrary to existing literature, investment analysts portrayed an above moderate degree of self-insight when assessing their own evaluation.

Underpricing continues to be a prominent issue within the Indonesian capital market, as many firms conducting an Initial Public Offering (IPO) tend to set initial share prices below their subsequent market value. This research investigates the moderating role of underwriter reputation in the relationship between profitability, financial leverage, and earnings per share (EPS) on IPO underpricing among firms listed on the Indonesia Stock Exchange (IDX). Utilizing a purposive sampling technique, the study analyzes data from 176 companies. The data are processed using Moderated Regression Analysis (MRA) with the help of STATA software. The findings reveal that profitability, measured by return on assets (ROA), significantly influences underpricing. In contrast, financial leverage (proxied by the debt-to-equity ratio) and EPS show no statistically significant effect. Moreover, underwriter reputation is shown to moderate the negative impact of both ROA and EPS on underpricing but does not moderate the relationship between the debt-to-equity ratio and underpricing. These results offer valuable insights into signaling theory and information asymmetry, highlighting the importance of firm fundamentals and intermediary reputation in IPO pricing strategies. The study contributes to a better understanding for investors, issuers, and regulators involved in the IPO decision-making process.

This study aims to analyze the influence of industry type, underwriter reputation, and return on assets (ROA) on the performance of IPO stocks before and after COVID-19. The research is motivated by the issue that the COVID-19 pandemic, which began in 2020, had a significant impact on the global economy, including Indonesia’s capital market. The Jakarta Composite Index (IHSG) sharply declined at the onset of the pandemic, yet Initial Public Offering (IPO) activity showed an increase. This raised questions about the factors that influence IPO stock performance during the period before and after the pandemic. The research method uses a quantitative approach with multiple linear regression analysis. Data was collected from 56 companies that conducted IPOs during the period 2018–2022, including financial statements and closing stock prices. The results indicate that industry type and underwriter reputation have a significant impact on IPO stock performance, both before and after the pandemic. However, ROA did not show a significant effect. These findings provide important insights for investors, companies, and regulators in understanding the dynamics of the capital market amid global economic changes.

This study attempts to predict how long a newly listed corporation, usually termed initial public offering (IPO), will survive on the equity listing market. The three-fold contribution of this study comprises a hand-collected and substantially expanded dataset for listed IPOs (1990–2017) over a maximum tracking period of 31 years (1990–2020) to predict the IPO survival on emerging Malaysian capital market, the rationale and consequences for unifying the two listing boards (Main Board and Second Board) in 2009, and an investigation of the predictive role of ex ante strategic prospectus information as early warning signals for sustainable survival of Malaysian IPOs. We also make comparisons for the survival profile of IPOs listed on different listing equity boards. We use Cox proportional hazard (PH) model to estimate the empirical results because of the cohort research design of the study. Overall empirical results show that survival curves for IPOs listed on Main Board and Second Board were not statistically different. However, Second Board IPOs remained more vulnerable to hazard. The survival curves for IPOs listed on Main Market and ACE Market are statistically different. Empirical results reveal that high share premium, high listed capital, and longer firm age at listing date significantly increase the survival (reduce hazard) of IPOs listed on the Main Market and the Second Board. However, bigger firm size and elevated risk factors significantly reduce the survival (increase hazard) of the listed IPOs mentioned above. However, share premium is the only variable that has a negative and significant correlation with IPO survival on ACE Market. These results have implications for the regulators, prospective investors, and policymakers of emerging markets, where the IPO prospectus disclosures bridge the information asymmetry gap prevailing due to the nonexistence of public information prior to the IPO. Empirical findings of this study can be generalized to other developing and emerging markets where IPO prospectus substantially mitigates information asymmetry and ex ante strategic firm characteristics act as early warning signals in predicting IPO survival.

This study investigates the effect of profitability, financial leverage, and market value on stock underpricing in companies conducting Initial Public Offerings (IPOs) on the Indonesia Stock Exchange from 2018 to 2022. Using a quantitative approach and multiple linear regression analysis, data were obtained from 189 companies selected through purposive sampling. The findings reveal that profitability, financial leverage, and market value simultaneously influence underpricing. Partially, profitability and market value have a significant negative effect on underpricing, while financial leverage shows no significant effect. The negative effect of profitability aligns with signaling theory, suggesting that high profitability signals low risk and strong performance, thus reducing the need for aggressive underpricing. Similarly, high market value indicates stronger investor perception and reduces uncertainty, leading to lower underpricing. Conversely, the insignificance of financial leverage implies that investors may not perceive debt levels as critical in IPO pricing, especially in regulated capital markets. This research contributes to the ongoing debate regarding the inconsistent effects of firm-specific financial indicators on underpricing across different contexts. The results highlight the contextual nature of IPO pricing decisions and suggest that market perception and external regulatory factors may moderate traditional financial indicators.

This study aims at investigating the factors affecting the share’s underpricing in service companies of the Initial Public Offering (IPO) on the Indonesia Stock Exchange (IDX) covering the period from 2011 to 2017. Compared to the precedent studies, this study provides an empirical comparison between Islamic and non-Islamic shares on 22 underpricing stock samples from 44 IPOs in Islamic service shares and 21 underpricing samples from 32 IPOs in non-Islamic service shares. This study adopts a multiple linear regression analysis and an independent sample t-test method. It is revealed that the underwriter's reputation and auditor's reputation have a significant effect on the underpricing of IPO on IDX, both in Islamic and non-Islamic service companies. The result of independent samples t-test indicates that Islamic service shares companies have better financial performance compared to non-Islamic service shares companies. Predicated upon the results, this study implicatively insinuates that companies based on Shariah compliance could anticipate the underpricing level more expeditiously since the Shariah principles are in line with the decreasing level of underpricing.