Influence of institutional investors' participation on flipping activity of Malaysian IPOs

Masih

Abdul-Rahim

et al. 2018

JIABR

Self Cite

Purpose The purpose of this study is to identify selected information from the prospectus that might signal the initial public offering (IPO) offer price. Design/methodology/approach This study uses cross-sectional data for a 14-year period from 2000 to 2014 in examining hypotheses relating to Shariah-compliant status, institutional investors, underwriter ranking and shareholder retention, with respect to their associations with the offer price of the IPOs. Further, this study uses ordinary least squares (OLS) for all models, including the models for both subsamples of Shariah- and non-Shariah-compliant IPOs. As for robustness, this study incorporates the quantile regression and quadratic model. Findings The results tend to provide support for the argument that firms with Shariah-compliant status reflect lower uncertainty and project better signalling of quality due to greater scrutiny by the government and thus are able to offer IPOs at higher prices. Similarly, firms with a higher proportion of shareholder retention indicate lower risks as insiders forego their options to diversify their portfolio, and hence could price their IPOs higher. Finally, the involvement of institutional investors and higher underwriter ranking could be used by firms to disregard information asymmetry, and therefore, the issuer might have to discount the IPO offer price. Research limitations/implications This study focuses solely on information in the prospectus that should not be disregarded by the investors in valuing the appropriateness of the IPO offer price. This study contributes in terms of providing a better understanding of the determinant factors of the IPO offer price of the firms which are Shariah-compliant. Originality/value This paper provides evidence for the determinants of the IPO offer price in a fixed pricing mechanism for both Shariah-and non-Shariah-compliant IPOs.

Section: Information Matter In Ipo Pricingmentioning

confidence: 99%

Does prospectus information matter in IPO pricing?

Masih

Abdul-Rahim

et al. 2018

JIABR

Self Cite

“…Thus, the dummy variable UNDRW takes the value of "1" if the certification of IPO was done by a prestigious underwriter and "0" otherwise. PRIV denotes the percentage of the proportion of new shares assigned to institutional investors over the total number of offered shares (Che-Yahya et al, 2014). PUBLIC defines as a percentage of the number of shares offered to retail investors over the overall shares offered by IPO (Tajuddin et al, 2018).…”

Section: Initial Public Offering Valuation and Underpricingmentioning

confidence: 99%

IPO valuation using the price-multiple methods: evidence from Malaysia

Ong

Mohd

2021

JFRA

Purpose This study aims to investigate the valuation accuracy of Malaysian initial public offerings (IPOs) by using price-multiple methods. Design/methodology/approach Cross-sectional data including 467 IPOs listed on the Malaysian stock exchange were used for the period of 2000–2017. This study used univariate ordinary least square (OLS) regression to analyse the relationship between IPOs’ price-multiples and comparable firms’ price-multiples. The test of valuation accuracy was conducted via computing valuation errors by segregating the sample into two groups: fixed-price IPOs and book-built IPOs. Furthermore, multiple OLS regression was used to examine the influence of IPO valuation on underpricing. Findings The findings of the results suggested that IPOs price-to-earnings (P/E), price-to-book (P/B) and price-to-sales (P/S) multiples were positively related to the median P/E, P/B and P/S multiples of five comparable firms matched by industry and revenues. The P/S multiple was shown to be the most significant valuation method, specifically in book-built IPOs. The findings indicated that those firms that had a lower valuation in comparison to the comparable firms were inclined to underprice their IPOs to allure investors to subscribe IPOs. In addition, book-built IPOs that had fair valuations were inclined to generate higher initial returns for investors. Practical implications The findings of this study observed implications for underwriters in avoiding the mis-valuation issue by considering the book-building mechanism. Originality/value This study attempted to explore the suitability of the valuation method to value IPOs in Malaysia.

“…Second, according to Che Yahya, Abdul-Rahim, and Yong ( 2013), there is a positive relationship between lock-up provision and flipping activity. Che Yahya et al (2013) argue that lock-up could reduce the supply of IPOs in the market for flipping. This suggests that lock-up provision is not significant in influencing flipping activity.…”

Section: Literature Reviewmentioning

confidence: 99%

The Influence of Information Asymmetry on IPO Lock-up Provisions: Evidence from Malaysian Market

Abdul-Rahim

Che-Yahya

2019

Global Business Review

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Most of major shareholders, known as promoters of the firms, are subject to lock-up ratio for a certain period, following their company's IPO listing. Interestingly, the lock-up ratio among firms vary, suggesting that it serves as a signalling tool to minimize potential conflicts between insiders and uninformed investors. This article investigates the influence of two main factors, that is, underwriter reputation and market capitalization on lock-up ratios. The regression results show that market capitalization, a proxy for firm size, tends to have a positive impact on lock-up ratio while the effect of underwriters' reputation is weak. The findings also indicate that large firms with quality underwriters (proxied using the interaction of market capitalization and underwriter reputation) have lower information asymmetry and risk, and, therefore, are associated with higher lock-up ratios.