Abstract
This study aims to identify the relationship between underpricing and long-term market performance of IPOs in the Indonesian Stock Exchange (IDX), as well as determinants of IPOs' market performance. We based our paper on the idea that it is more meaningful and relevant to investigate underpricing and long-term market performance determinants at different distribution points. OLS and quantile regression analysis isapplied to 105 samples of IPOs during 2009-2013. The results of OLS and quantile regressions indicate that assets value, age, proceeds, and underwriters’ reputation are determinants of long-term market performance; while assets, age and proceeds also become underpricing determinants. Among these factors, proceeds become the most important determinant of underpricing and long-term market performance.
Highlights
The development of capital market in Indonesia cannot be separated from the increased awareness of stakeholders about the function of the capital market as an alternative source of funds and investment
The lowest proceeds (IDR30.1 billion) by PT Visi Telekomunikasi Infrastruktur Tbk. was only about 0.48% of the largest proceeds of IDR6.3 trillion made by PT Indofood CBP Sukses Makmur Tbk. This indicates that the policy of capital market deregulation conducted by the government of Indonesia (Economic Policy of the Government of the Republic of Indonesia December 1987) is quite positive
This study aims to identify the relationship between underpricing and long-term market performance of IPOs in Indonesia Stock Exchange during the period 2009-2013
Summary
The development of capital market in Indonesia cannot be separated from the increased awareness of stakeholders about the function of the capital market as an alternative source of funds and investment. As a source of funding, the capital market is a vehicle that can be used to raise long-term funds from the community that will be channelled into productive sectors. Capital markets allow investors to find alternative investment options that suit their risk preferences. The most often mechanism used by issuers to enter the capital market for the first time is the initial public offerings. Initial public offerings is a corporate action in the form of a stock offering for the first time to the public. Through IPO activities, some of the company's funding needs will be collected from the public and affect public's ownership of the company's stocks. The information asymmetry problem of IPOs is enormous, both information asymmetry between issuers and investors as well as between investors
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