Group affiliation and the performance of IPOs in the Indian stock market

Marisetty, Vijaya B.; Subrahmanyam, Marti G.

doi:10.1016/j.finmar.2009.09.001

Cited by 95 publications

(57 citation statements)

References 38 publications

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“…Investors may prefer to invest in firms with the best operational knowledge, which translates into an advantage for BG firms over independent firms in raising capital from markets. Thus, as long as there are more opportunities confronting a BG than can be funded internally, the access to capital markets not only provides access to additional capital, but also the terms for doing so may be more favorable for a BG‐affiliated firm (see, for instance, Byun et al ., , and Marisetty and Subrahmanyam, , for some evidence on the preferential terms under which BGs may access capital).…”

Section: Performance Effects Of Bg Affiliationmentioning

confidence: 99%

Business groups in developing capital markets: Towards a complementarity perspective

2014

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Section: Performance Effects Of Bg Affiliationmentioning

confidence: 99%

Business groups in developing capital markets: Towards a complementarity perspective

2014

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“…Ghosh [79]; Marisetty and Subrahmanyam [80] studied IPOs of Indian business group affiliated firms and empirically proved that IPOs belonging to business group affiliated firms show greater degree of underpricing than the stand alone firms. The study by Marisetty and Subrahmanyam [80] consider 2713 IPOs between 1991 and 2004. They attribute higher degree of underpricing due to tunneling effect that outweighs the certification effect associated with the business group affiliated firms.…”

Section: Business Group Affiliationmentioning

confidence: 99%

Underpricing of Initial Public Offerings: A Literature Review

Katti¹,

Phani²

2016

ujaf

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Rock's [1] theory ascertains information asymmetry as a primary reason to answer "Why New Issues are Underpriced?" Theoretical construct of this seminal work is based on information asymmetry between various classes of investors. Empirical manifestation of this theoretical explanation is based on considering different proxy measures to quantify the information asymmetry as perceived by various researchers over the past three decades. The growing IPO literature also explained underpricing with the help of agency theory, signaling, behavioural theories etc. Empirical research has identified various determinants of IPO underpricing. The influence of various factors predominantly depends upon country specific regulations, market microstructure and price discovery mechanism. Although many factors have justified the degree of underpricing, controlling for these factors does not completely eliminate the degree of under pricing. The justification of residual underpricing through these factors has limitations in terms of failure to completely explain the IPO underpricing. The paper reviews different factors presented in the extant literature that influence the price discovery mechanism of initial public offerings (IPO) in various economies. We conclude that the degree of underpricing is dynamic and various markets forces interact simultaneously in observing the variation in pricing the new equity issues. This paper points out the significance of regulatory framework in explaining the degree of IPO underpricing.

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“…This implies that having the majority of ownership affiliated with a family group sends a positive signal to the market. The proceeds of the rights offering would likely be put to proper use, which will affect the firm's ability to survive longer compared to stand-alone firms, mainly due to the co-insurance benefits and internal capital markets (Khanna and Palepu, 2000;Khanna and Yafeh, 2005;Marisetty and Subrahmanyam, 2010).…”

Section: Drivers Of Price Reaction To Rights Issue Announcementsmentioning

confidence: 99%

Drivers of price reaction to rights issue announcements in the Kuwait Stock Exchange

Alhashel

Alojayan

2015

Applied Economics

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This study examines the drivers behind stock price reactions to announcements of rights issues by firms listed on the Kuwaiti Stock Exchange for the period 2003-2013. We find higher cumulative abnormal returns for firms that undertake larger issues, with the issue size reflecting the availability of favourable investment opportunities and their potential positive impact on firms' earnings. We also document a positive price reaction in firms that are affiliated with a family group. We interpret this as evidence that the proceeds of the rights offering would be employed effectively when the firm is controlled by a family firm. No evidence was found for the price pressure and pricing effects.

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Group affiliation and the performance of IPOs in the Indian stock market

Cited by 95 publications

References 38 publications

Business groups in developing capital markets: Towards a complementarity perspective

Business groups in developing capital markets: Towards a complementarity perspective

Underpricing of Initial Public Offerings: A Literature Review

Drivers of price reaction to rights issue announcements in the Kuwait Stock Exchange

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