Abstract
The objective of this study is to investigate the long-term (one to three year) performance of initial public offerings (IPOs) for sharia-compliant companies listed on the Malaysian Stock Exchange (MSE) for the period from 2006 till 2010. This study examines why some IPOs companies have a positive, and some IPOs companies have a negative long-term cumulative abnormal return (CAR). KLCI index is used as a benchmark for measuring long-term performance of IPOs for sharia-compliant companies. The empirical results show that the long-term performances for sharia-compliant companies are performed better (16.81 percent) than their benchmark for CAR equal-weight and the result for CAR value-weight show a slightly outperformed their benchmark (-0.07 percent). The results also indicate that CAR for equal-weight and value-weight of IPOs for sharia-compliant companies are significantly higher over performing by 14.58 percent and 4.11 percent respectively in the year 2006. While the results in 2007 (-1.34 percent) and 2008 (-3.43 percent) for value–weight are underperformed. This study also found that the underpricing, offer price, offer size, market type, trading/service industry, consumer product industry, property industry and REIT industry were statistically significant.
Highlights
Islamic banking introduced in Malaysia in the year of 19821, the concept of Islamic finance has been raised2
After deducting Initial Public Offerings (IPOs) with imperfect information, this study used 74 IPOs for sharia-compliant companies that meet the following criteria: (i) the companies are listed on the Malaysian Stock Exchange (MSE) for 3 years; (ii) for companies with imperfect information must be excluded from this study; and (iii) this study used closing pricing to calculate Cumulative Abnormal Return (CAR)
Part 1 presents the results for CAR and part 2 presents the results as concerns the Pearson correlation analysis and multiple linear regression analysis for long-term performance of IPOs
Summary
Islamic banking introduced in Malaysia in the year of 19821, the concept of Islamic finance has been raised. On May 2013, the market capitalization of sharia-compliant securities was valued at MYR3 1.017tln or 63% out of a total market capitalization of about MYR1.6tln. IPOs for sharia-compliant companies are seen as a change for Muslim companies and investors to participant in Islamic investments. The high demand for sharia-compliant companies interacts with more IPOs companies to list shares on the sharia board. Nashirah Binti Abu Bakar, Sofian Rosbi Long Term Performance of Islamic Share Price for Initial Public Offerings (IPOs) in Malaysia: Evidence from Sharia-Compliant Companies Listed on the Malaysian Stock Exchange (2006-2010)
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