Performance of the Initial Public Offering (IPO) in the Nepalese Stock Market

Abstract

This study examines the performance and determining variables of IPOs of Nepalese stock market. Subscription rate, issue size, firm size, reputation of issue manager and market condition are selected as IPO factors and these are the independent variables. Initial return is dependent variable. The secondary source of data is used to assess the performance of the initial public offerings in the Nepalese stock market. The study is based on 61 firms for the period 2005-2011. The regression models are estimated to test the significance and importance of initial return in Nepalese stock market.The result shows that there is a positive impact of IPO factors (firm size, reputation of issue manager, subscription rate and market condition) on initial return. It indicates that greater the firm size, higher would be the initial return. Similarly, higher the reputation of issue manager, higher would be the initial return. Likewise, increase in subscription rate leads to better initial return. The result reveals that better the market condition, higher would be the initial return. The study also indicates that there is a negative relationship between issue size and initial return which implies that greater the issue size, lower would be the initial return. The coefficient of beta is positive and significant for firm size, reputation of issue manager, subscription rate and market condition and initial return whereas the beta coefficient is negative and significant for issue size and initial return.