The initial listing performance of Indian IPOs

Krishnamurti, Chandrasekhar; Kumar, Pradeep

doi:10.1108/03074350210767681

Cited by 42 publications

(36 citation statements)

References 9 publications

(9 reference statements)

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“…Several explanations have been offered in literature to explain the phenomenon of underpricing. 5 Some of the arguments offered for underpricing are information asymmetry (creating ex-ante uncertainty), which suggests that there is imperfect information among firms, investors, and underwriters (Muscarella & Vetsuypens, 1989;Rock, 1986); signaling theory, which proposes that firms signal to prospective investors about the quality of their firm (Allen & Faulhaber, 1989;Welch, 1992); marketing theory, which suggests that underpricing brings attention to the stock on the opening day (Habib & Ljungqvist, 2001); regulatory constraints, which are especially prevalent in emerging markets wherein the government imposes regulations that affect the pricing of the firm (Affleck-Graves & Miller, 1989;Brandi, 1987;Krishnamurti & Kumar, 2002;Masulis, 1987); certification of insider information (Booth & Smith, 1986;Carter, Dark, & Singh, 1998); underwriter reputation (Beatty & Ritter, 1986); broadening the ownership base post IPO where underpricing helps attract new owners, thus increasing the liquidity of the newly issued firm (Booth & Chua, 1996;Brennan & Franks, 1997); the lack of governance by the board (Certo, Daily, & Dalton, 2001); and spinning that enriches the executives of prospective investment bank clients (Aggarwal, 2003;Fishe, 2002;Krigman, Shaw, & Womack, 1999), among others. Brau and Fawcett (2006) also added a unique perspective to the IPO literature by focusing their Performance of IPOs in Postapartheid South Africa 3 analysis of IPOs using data obtained from a survey of chief financial officers (CFOs).…”

Section: Review Of Relevant Literaturementioning

confidence: 98%

Short- and Long-Run Performance of Initial Public Offerings in Postapartheid South Africa

Alli

Subrahmanyam

Gleason

2010

Journal of African Business

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This paper examines the impact of liberalization on initial public offering (IPO) performance in postapartheid South Africa. Results indicate a significant reduction in IPO underpricing in the postapartheid period relative to the level reported for IPO offerings in the apartheid period. Significant long-term underpricing for periods of up to two years following the IPO is noted. Many IPO offerings in South Africa are delisted and acquired or merged within three to five years of the IPO offering. Subsequently acquired IPOs are found to be more underpriced than are nonacquired IPOs, a result consistent with the use of IPOs as a means of facilitating acquisitions and mergers.

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Section: Review Of Relevant Literaturementioning

confidence: 98%

Short- and Long-Run Performance of Initial Public Offerings in Postapartheid South Africa

Alli

Subrahmanyam

Gleason

2010

Journal of African Business

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“…Ljungqvist and Yu (2003). The average initial return for India is based upon IPOs with an offer price of above 10 Rupees, with the data coming from Table 5 of Krishnamurti and Kumar (2002). The Indonesian numbers for 1989-1994 are from Arosio et al (2000), where they cite Hanafi's (1997) working paper 'Efisiensi Emisi Sahan Baru di Bursa Efek Jakarta (1989-94) '.…”

Section: The Rise and Fall Of The Euro Nm Marketsmentioning

confidence: 99%

Differences between European and American IPO Markets

Ritter¹

2003

Euro Fin Management

254

144

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This brief survey discusses recent developments in the European initial public offering (IPO) market. The spectacular rise and fall of the Euro NM markets and the growth of bookbuilding as a procedure for pricing and allocating IPOs are two important patterns. Gross spreads are lower and less clustered than in the USA. Unlike the USA, some European IPOs, especially those in Germany, have when-issued trading prior to the final setting of the offer price. Current research includes empirical studies on the valuation of IPOs and both theoretical and empirical work on the determinants of short-run underpricing.

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“…Since the liberalization reforms of 1992, the Indian capital market has evolved tremendously (Saith, 2008, Sayed, 2017Dayanandan and Sra, 2018;Tiwari and Vidyarthi,2018). Indian investors, regulators and government introduced and adopted various measures to improve the institutional settings 1 in the country (Wadhwa and Reddy, 2018;Saith, 2008 4 For an overall view on the Indian IPO market and institutional characteristics since liberalization reforms of 1992, pls see Krishnamurti and Kumar (2002). volumes, sponsors are few of the changes that can be observed in the Indian capital markets.…”

Section: Introductionmentioning

confidence: 99%

An empirical analysis of the performance of sponsored vs non-sponsored IPOs

Sivaprasad

Dadhaniya

2019

JAEE

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Purpose India is one of the largest IPO markets in the world. However, IPO research in the developing world is limited. The purpose of this paper is to test the performance of Indian IPOs based on sponsored vs non-sponsored issues. The authors classify the IPO sample into venture capital (VC) and private equity (PE) sponsored issues and non-sponsored ones and include key operating characteristics as performance predictors. Design/methodology/approach The dependent variable is the buy-and-hold abnormal returns. The study uses key operating characteristics such as market capitalization, net sales, earnings before interest, taxes, depreciation and amortization, depreciation and amortization, price-to-book, asset turnover and leverage. A cross-sectional analysis is applied to test the long-run performance. Findings Sponsored IPO issues convey favourable information to investors about future earnings and prospects of the firm. The findings indicate that sponsored issues and, in particular PE sponsored issues are perceived by investors as having a positive impact on the operational performance of firms that the PE firms are involved in relative to the constituents of the index and this superior operational performance over time also leads to relatively better performing share prices. There are significant differences in terms of market size, industry classification and key operating characteristics across the three groups of issues. Research limitations/implications This study has had to deal with much smaller samples of PE and VC when compared to similar studies conducted in the developed markets such as the UK and the USA. Further robustness tests on the market performance using factor models posed a problem due to limitation of the availability of these factors. Practical implications For the capital markets investors and policy makers, this research demonstrates the increasingly important role that PE and VC funds play in the investment landscape in India. It exhibits the increasing investor confidence in the Indian capital markets. Originality/value Using a sample of Indian IPOs comprising VC sponsored and PE sponsored issues, this study analyses the performance of Indian IPOs in an emerging market setting. This study, thus, contributes to the limited IPO research undertaken in developing markets.

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The initial listing performance of Indian IPOs

Cited by 42 publications

References 9 publications

Short- and Long-Run Performance of Initial Public Offerings in Postapartheid South Africa

Short- and Long-Run Performance of Initial Public Offerings in Postapartheid South Africa

Differences between European and American IPO Markets

An empirical analysis of the performance of sponsored vs non-sponsored IPOs

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