Underpricing of Initial Public Offerings: A Literature Review

Katti, Supriya; Phani, B.V.

doi:10.13189/ujaf.2016.040202

Cited by 27 publications

(26 citation statements)

References 116 publications

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“…Negative sign shows that underpricing more likely occurs in reopening auction, whereas new issuance of sukuk indicates a less underpricing. This finding is contrary to several events in stock underpricing because majority of stock IPOs experienced a high underpricing [14]. It happened because investors saw IPO stock as high risk instrument as they had no benchmark performance beforehand.…”

Section: B Mispricing Determinantcontrasting

confidence: 70%

Determinants of Mispricing on Indonesian Sovereign Sukuk Auction

Pertiwi¹,

Arundina²

2018

Proceedings of the 2nd International Conference on Indonesian Economy and Development (ICIED 2017)

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Common Value Theory points out the situation in financial instrument auction where investors tend to bid a lower price than the actual value and it results in an underpricing of financial instrument. The underpricing, further, may hamper the market as it leads to revenue loss for the company. As the Islamic financial market developed, government of Indonesia expands their instrument variations and started to issue Islamic Bond (sukuk) in 2008. There is still lack of empirical literature relating to sukuk pricing performance although sukuk has several distinct features such as the existence of underlying asset. This paper attempts to examine the underpricing indication in sukuk issuance during 2012-2016 and analyze the factors that might explain its persistence. To examine the existence of sukuk underpricing issuance, this study uses yield spread from weighted average yield when auction and market yield when auction. To this end, Ordinary Least Square model is applied to analyze the determinants of underpricing. In contrast to the theory, the result shows that average sukuk issuance in Indonesia indicates a higher market yield than weighted average yield when auction.

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Section: B Mispricing Determinantcontrasting

confidence: 70%

Determinants of Mispricing on Indonesian Sovereign Sukuk Auction

Pertiwi¹,

Arundina²

2018

Proceedings of the 2nd International Conference on Indonesian Economy and Development (ICIED 2017)

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“…Anomali yang terjadi pada penawaran saham perdana (Initial Public Offering/IPO) ke publik menunjukkan adanya kecenderungan bahwa saham akan mengalami underpriced pada saat saham tersebut go public di lantai bursa. Underpricing secara umum digambarkan sebagai kondisi di pasar sekunder di mana harga saham yang ditawarkan di pasar perdana (IPO) lebih rendah dibandingkan harga penutupan di pasar sekunder yang menyebabkan adanya return yang positif pada hari pertama perdagangan di bursa (Beatty & Ritter, 1986;Fung et al, 2014;Katti & Phani, 2016).…”

Section: |unclassified

“…21, No. 2, April 2017: 228-237 | 230 | Kondisi ini kemudian akan berdampak pada lebih rendahnya harga yang ditawarkan di pasar perdana dibandingkan harga perdagangan pada hari pertama di lantai bursa (Beatty & Ritter, 1986;Alhadab et al, 2016;Katti & Phani, 2016).…”

Section: Pengembangan Hipotesisunclassified

“…Dalam perspektif signalling theory, IPO underpricing dapat dipahami ketika perusahaan perlu untuk mengirimkan sejumlah sinyal kepada investor bahwa mereka adalah perusahaan yang baik dan berkualitas. Berdasarkan teori ini, perusahaan yang 'baik' akan menghasilkan return yang 'baik' pula (Katti & Phani, 2016). Oleh sebab itu, perusahaan akan mencoba untuk menjadi baik dengan berbagai cara, salah satunya melalui praktek manajemen laba (Gao et al, 2015).…”

Section: Pengembangan Hipotesisunclassified

“…Penelitian ini menemukan bahwa perusahaan manajemen laba riil yang dilakukan perusahaan telah berpengaruh kepada initial return saham pada hari pertama perdagangan. Hal ini sesuai dengan teori signalling yang menjadi landasan penelitian ini, bahwa perusahaan akan melakukan upaya semaksimal mungkin untuk memberikan kesan perusahaan yang 'baik' atau 'berkualitas' kepada investor sehingga hal tersebut akan terefleksi pada fenomena adanya return yang positif pada hari pertama di bursa (Katti & Phani, 2016). Secara spesifik, penelitian ini menemukan bahwa praktikpraktik manajemen laba rill melalui pengelolaan cash flow, biaya produksi dan biaya diskresioner mampu secara efektif meningkatkan return perusahaan pada hari pertama di pasar sekunder.…”

Section: Pembahasanunclassified

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Manajemen Laba: Bagaimana Dampaknya Terhadap Ipo Underpricing?

Sitompul

Purwohedi

Warokka

2017

Jurnal Keuangan Dan Perbankan

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The purpose of this research was to investigate the effect of accrual and real earning management on IPO underpricing which was measured by initial return, on the first day of trading in Indonesia Stock Exchange, of Indonesian manufacturing companies during 2010-2014. This research was conducted using purposive sampling technique from 20 analyzed manufacturing companies. Earnings management variable was measured using discretionary accruals, abnormal cash flow, abnormal production cost, and abnormal discretionary expenses while IPO underpricing was calculated using the initial return on the first day of stock trading in stock exchange. This research used ordinary least squares technique (OLS) multiple linear regression analysis. The result of this study revealed that the real earning management practice through abnormal cash flow had a positive effect on IPO underpricing while the other earnings management proxy had a negative significant effect on underpricing. This finding indicated that every earnings management practice could give an effect in a different direction on IPO underpricing phenomenon, as a response of investors on the published company's performance. Hence, this study's finding provided a significant empirical contribution to the signalling theory, in particularly for the issue of IPO underpricing in Indonesian Capital Market practices. ABSTRAK Penelitian ini bertujuan untuk melihat pengaruh manajemen laba akrual dan riil terhadap IPO underpricing yang diukur dengan initial return hari pertama perdagangan saham di bursa pada perusahaan-perusahaan manufaktur yang melakukan IPO di Bursa Efek Indonesia periode Tahun 2010-2014. Penelitian ini menggunakan teknik purposive sampling dengan total 20 perusahaan manufaktur yang dianalisis. Variabel manajemen laba diukur dengan menggunakan proksi discretionary accruals, abnormal cash flow, abnormal production cost, dan abnormal discretionary expenses. Sedangkan, variabel underpricing dihitung menggunakan initial return pada hari pertama perdagangan saham di bursa. Penelitian ini menggunakan teknik ordinary least squares (OLS) multiple linear regression analysis. Hasil dari penelitian ini menemukan bahwa praktik manajemen laba riil melalui abnormal cash flow berpengaruh positif signifikan terhadap adanya fenomena underpricing. Sementara, proksi manajemen laba lainnya berpengaruh negatif signifikan terhadap underpricing. Hal ini tentunya mengindikasikan bahwa setiap praktik manajemen laba dapat memberikan pengaruh dalam arah yang berbeda terhadap fenomena IPO underpricing, sebagai respons investor atas kinerja perusahaan yang dipublikasikan. Hal ini tentunya memberikan kontribusi empiris bagi teori sinyal pada praktek Pasar Modal Indonesia, khususnya dalam topik IPO underpricing.

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Freshen up before going public: Do environmental, social, and governance factors affect firms' appearance during the initial public offering?

Harasheh

2022

Bus Strat Env

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Going public (or initial public offering IPO) is a corporate strategic decision for value enhancement. Underpricing is a phenomenon related to going public and has been studied from a purely financial perspective. In this paper, we investigate whether underpricing incorporates sustainability performance pre-IPO by establishing an original linkage between underpricing and ESG factors before the firm's listing on stock markets. Using informational asymmetries and quality signaling frameworks, we track the journey of going public by Italian Small Medium Enterprises (SMEs) from 2009 to 2017 and show how sustainability issues are incorporated into the IPO underpricing.We demonstrate that underpricing is strongly related to financial and sustainability variables only in the year just before the IPO, indicating better informational efficiency, quality signaling, and image-improving practice. The post-IPO stock return is less correlated with the firm's financial and ESG variables, suggesting that markets can incorporate such information into stock returns in the long run. This paper provides novel insights by delivering an original linkage between a firm's public listing attributes and sustainability performance, offering a temporal tracking of the SMEs before and after the IPO, emphasizing the role of sustainability in the IPO process.

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Underpricing of Initial Public Offerings: A Literature Review

Cited by 27 publications

References 116 publications

Determinants of Mispricing on Indonesian Sovereign Sukuk Auction

Determinants of Mispricing on Indonesian Sovereign Sukuk Auction

Manajemen Laba: Bagaimana Dampaknya Terhadap Ipo Underpricing?

Freshen up before going public: Do environmental, social, and governance factors affect firms' appearance during the initial public offering?

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