Abstract
Initial Public Offering (IPO) is an important and widely popular research topic among many researchers in finance discipline. This study is prepared to identify the connection among various empirical studies and theories regarding underpricing of IPO in the stock market of Bangladesh. We have chosen the time frame of June 2011 to June 2016 at DSE to conduct the research. In this study, ordinary least square (OLS) regression method is used to identify in what extent the dependent and the independent variables are related in the level of underpricing. The results of the study disclose that oversubscription rate, offer size have substantial influence in IPO underpricing at DSE. On the other hand, offer time and size of the firm do not have significant influence on the level of underpricing. These variables are very significant and play important roles with the level of underpricing at DSE and it shows relation to signaling theory, information asymmetry theory and agency cost theory.
Highlights
1.1 Rational of the StudyInitial Public Offering (IPO) is an important and widely popular research topic among many researchers in finance discipline
Offer Size It is argued by Carter and Manaster (1990) that investors use the size of the offer to measure the performance of the IPOs
Size of the firm, Over subscription rate were considered as the explanatory variable
Summary
Initial Public Offering (IPO) is an important and widely popular research topic among many researchers in finance discipline. Researchers have documented several studies and empirical evidence regarding this topic which identifies IPOs can be underpriced both in developing and developed countries (Islam and Ali 2010). The core intention of this research study is to identify the price behavior of IPOs of the Dhaka Stock Exchange in the period of June 2011- June 2016. This paper will contribute to the current literature of IPOs in the emerging market and that in Dhaka Stock Exchange with regard to the underpricing and the stock price behavior subsequent to IPOS. We have tried to identify the trend of underperformance of IPO in Bangladesh Stock Market. Dual listing is allowed for the initial public offerings in this market.
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