The present research study is a detailed examination of the under pricing and long term performance of 20 IPOs in Indian market listed on Bombay Stock Exchange (BSE) or National Stock Exchange (NSE)or both. The paper attempts to investigate both under pricing and under performance of IPOs in the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) for a period of one year.
Initial Public Offering under pricing and long run poor performance of common stock has been an unresolved puzzle in the financial literature for many years. Researchers and practitioners have attempted many times to explore a theoretical base to explain the behaviour of IPO market in the history of capital market. But, after each study the findings seem to be totally different from that of the previous ones. No single study could explore all the issues connected with IPOs. The present study is an attempt to investigate into the under pricing phenomenon and the long-run performance of IPOs in Indian capital market during the period beginning from August 1st 2007 to August 11th 2008. The study takes only those IPOs which have been priced using book building procedure and listed on Bombay Stock Exchange or National Stock Exchange or both.
This paper developed by Randolph P. Beatty & Jay R. Ritter involves two propositions. ...
ng and the uncertainty of investors regarding its value are monotonously related and investment bankers enforce the resulting under pricing equilibrium. The empirical evidence support that when the investors lose on account of non receipt of initial return (no under pricing) and issuers will lose when there is too much of under pricing and thus forfeit the value of its reputation capital.
Anatomy of Initial Public Offerings of Common Stock- Tinic, Seha M
In this paper, Tinic and Seha M demonstrate the anatomy of IPOs. The paper revolves around the hypothesis that under pricing serves as a form of insurance against legal liability and the associated damages to the reputations of investment bankers. The authors, after their empirical study reveal observe that there are implicit support after t he Securities Act of 1933, for the implicit insurance hypothesis. They have located a relationship between gross under pricing and market segmentation among prestigious and fringe investment bankers in the post-1933 period.
The Under pricing of Initial Public Offerings and the Partial Adjustment Phenomenon- Kathleen Weiss Hanley
In this research paper, the authors demonstrate the relationship between the final offer price disclosed in the preliminary prospectus and the range of anticipated offer prices. They observe that these prices are a good predictor of initial returns. The authors conclude that "issues that have final offer prices which exceed the limits of the offer range have greater under pricing than all other initial public offerings, and are also more likely to increase the number of shares issued" (Hanley, 1993).
The Opening Price Performance of Initial Public Offerings of Common Stock, by Christopher B. Barry and Robert H. Jennings
In this article, the authors