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

Short run performance of initial public offerings in Nepal

“…This indicates investors overreact to IPOs and their overreaction explains level of underpricing for a longer length of time. This finding is consistent with study of Malhotra and Nair (2015), Pradhan and Shrestha (2016), Sohail et al (2018) and Subedi and Dangal (2022) that shows significant positive relationship between subscription rate and level of underpricing that expounds that the higher the extent of over subscription will lead to shortage in investors allocation so investors tend to overpay for share in order to fulfill their desired allocation. Uninformed investors also tend to follow the informed investors and results higher subscription rate for shares, thus resulting underperformance for longer duration.…”

“…Bansal and Khanna (2013) taking 320 IPOs that were listed on Bombay Stock Exchange from 2000 to 2010 found that negative correlation between issue size and level of underpricing is consistent with finding concluded by Deb and Marisetty (2010). Pradhan and Shrestha (2016) in Nepalese stock market concluded issue size and initial return have a negative association consistent with study by Ferdous et al (2021). Ritter (1991) studied 1,526 American companies IPOs during 1975 to1884 found that young companies, which are thought to be riskier, have higher underpricing since age is proxy for ex-ante uncertainty similar to study by Sehgal and Singh (2003) on 438 Indian IPOs listed on Bombay Stock Exchange during 1992 to 2001.…”

“…This aspect is strongly tied to the success of the IPO, and one-third of companies are persuaded that this is most significant factor when thinking about an IPO. Pradhan and Shrestha (2016) found positive impact between market conditions and initial return while Dimovski et al (2011) and Bansal and Khanna (2013) found no significant association.…”

Initial Public Offering Investment: The General Investors’ Perspective

“…Similarly, market returns of NEPSE stocks ranked number three implying higher the market return higher will be the IPO return and is similar to the study findings of Aussenegg (2006) and Dahal (2007). Inspection of the weighted mean ranking, 'public subscription rate' of IPOs is found to be the least important factors influencing IPO return and risk among investors in the primary market which contradicts the findings of Omran (2005), Marisetty and Subrahmanyam (2008), Subedi (2012) and Pradhan and Shrestha (2016). They found that the public subscription rate of IPOs is the major variable that significantly influence the IPO return and risk.…”

“…Subscription rates measures the number of times an IPO has been over or undersubscribed. Studies found that higher the subscription rate, better the IPO return that investors' perceived (Omran, 2005;Marisetty & Subrahmanyam, Initial Public Offering Investment: The General Investors' Perspective 176 Management Dynamics, Vol.23, No.2, 2020ISSN: 2091-0460 2008and Pradhan & Shrestha, 2016). This indicates that subscription rates are one of the important variables that have impact on return of IPOs.…”