Impact of pricing mechanism on IPO oversubscription: evidence from Pakistan stock exchange

Mehmood, Waqas; Mohd‐Rashid, Rasidah; Ahmad, Abd Halim

doi:10.1108/par-04-2019-0051

Cited by 28 publications

(51 citation statements)

References 42 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…In such a situation, oversubscription ratio provides an opportunity to issuers to gain deeper insights regarding demand for its securities (Albada et al, 2019). Thus, it is the pricing mechanism that provides impetus to subscription ratio as a measure of estimating investors' demand (Mehmood et al, 2020). For instance, while book building issuers enjoy higher discretionary power and flexibility in fixing the prices and adjusting the size of an offering through potential investors' participation (Zheng et al, 2005;Yong, 2015), fixed price issuers are devoid of any such opportunity that solicits investors' private information useful in setting the offer price (Low and Yong, 2011;Yong, 2011), stressing the relevance of oversubscription in Indian SME settings, dominated by fixed price issues.…”

Section: Introductionmentioning

confidence: 99%

Determinants of oversubscription of SME IPOs in India: evidence from quantile regression

Arora

Singh

2020

APJBA

View full text Add to dashboard Cite

PurposeThe study aims to measure the subscription level and examine the determinants of oversubscription of small and medium enterprise (SME) initial public offerings (IPOs) in India.Design/methodology/approachThe study employs cross sectional data to analyze 403 SME IPOs issued from Feb 2012 to May 2018 and listed on Bombay Stock Exchange's small and medium enterprise (BSE SME) platform and National Stock Exchange (NSE) EMERGE to investigate the determinants of oversubscription of SME IPOs. Hence, the study makes use of ordinary least square regression and quantile regression to test the hypotheses formulated for the determinants of oversubscription.FindingsThe main findings unveil that while issue price, pricing mechanism, listing delay negatively influence oversubscription; firm size, underwriter reputation, hot market and underpricing have been divulged to positively influence oversubscription. However, issue size emerged out to be significant in quantile regression at 25th, 50th and 75th quantiles.Research limitations/implicationsThe present study is confined to limited number of variables in understanding the factors impacting oversubscription. Future studies could include macroeconomic variables like gross domestic product (GDP), inflation rate, industry specific variable, i.e. technology/nontechnology industry, financial/nonfinancial industry for better understanding. Cross country analysis is suggested in future studies to validate the findings of current study. Future studies are advised to conduct the study examining the factors affecting oversubscription in light of COVID-19 pandemic.Practical implicationsThe findings of the present study offer implications to academicians, investors, investment advisors and regulators. It provides useful insights to researchers by listing the factors that contribute to variation in subscription levels in emerging economy like India thereby, paving the way for future researches in SME IPOs in countries with different institutional settings. For investors, the study provides additional and novel information useful for IPO valuation and informed investment decisions. In addition, the findings put investment advisors in better place to guide potential investors regarding investment in good quality SME stocks (i.e. highly subscribed stocks) in more informative manner. Last but not the least, as this study would assist the regulators in handling future IPOs in a way that augments the chances of success of SME IPOs.Originality/valueThis study is a novel contribution in widening the IPO literature by examining the relationship between pre-IPO firm actions like issue price, pricing mechanism, issue size, firm size, listing delay, underwriter reputation, hot market, underpricing and oversubscription in unexplored settings of Indian SME IPOs.

show abstract

Section: Introductionmentioning

confidence: 99%

Determinants of oversubscription of SME IPOs in India: evidence from quantile regression

Arora

Singh

2020

APJBA

View full text Add to dashboard Cite

show abstract

“…This study suggested that initial return relies on the demand of IPOs. According to Mehmood et al, (2020a), investors' demand increases due to information heterogeneity, which can result in increased initial return. Furthermore, the risk of IPOs is negatively associated with initial return.…”

Section: 38% 8959%mentioning

confidence: 99%

“…2: Summary of variables.Sources: (Mohd-Rashid, Abdul-Rahim, Che-Yahya, & Tajuddin, 2019a);(Pu and Wang 2015);(Tajuddin, Mohd-Rashid, Khaw, & Che-Yahya, 2019);(Mehmood, Mohd-Rashid, & Ahmad, 2020a).…”

mentioning

confidence: 99%

Pricing Mechanism and IPO Initial Return: Evidence from Pakistan Stock Exchange

Mehmood¹,

Mohd‐Rashid²,

Ahmad³

2021

IJBS

View full text Add to dashboard Cite

This study adds to the extent of the literature by examining the impacts of pricing mechanism and premium offered on IPO initial return in Pakistan. Cross-sectional data were gathered using 90 listed IPOs retrieved from Pakistan stock exchange. Accordingly, ordinary least squares, quantile regression, robustness regression, and stepwise regression were employed to assess the factors that influenced initial return. This study describes the intensity of initial return in light of company specific and issue specific variables. Both closing and opening prices to offer price were incorporated to measure the initial return on the initial day of trading. The outcomes showed that after the reform of book building pricing mechanism, the initial return of IPOs increased, when compared to the fixed price offerings in Pakistan. This study concludes that information from book building pricing mechanism and premium had influenced both issuer and investor in subscribing IPO.

show abstract

“…First, Pakistan is an emerging economy, which is reshaping its capital market while going through economic and political instability (Malik et al, 2017;Mehmood and Mohd-Rashid, 2020). In the early 1990s, the Pakistan Stock Exchange underwent substantial and continual reforms that led to the introduction of privatization policies to stimulate trading activities and attract investors.…”

Section: Moderatingmentioning

confidence: 99%

Moderating effect of investor demand: privatized IPOs and flipping activity in the Pakistan IPO market

Anwar

Mohd‐Rashid

2021

PAR

Self Cite

View full text Add to dashboard Cite

Purpose The purpose of this paper is to examine the impact of privatized initial public offerings (IPOs) on flipping activity in the Pakistan IPO market. Design/methodology/approach This study sampled 95 IPOs listed on the Pakistan stock exchange over the period of 2000 to 2019. The ordinary least square technique and quantile regression were used to examine the impact of privatized IPO on flipping activity. Findings The present study finds that privatization affects flipping activity and creates a quality signal in Pakistan’s IPO market. The findings of this study also show that privatized IPOs were subjected to high levels of flipping activity compared to non-privatized IPOs. Additionally, investors’ demand has been found to moderate the relationship between privatized IPOs and flipping activity in Pakistan’s IPO market. Research limitations/implications Based on the fact that the sample consists of a combination of privatized and non-privatized IPOs, the results provide valuable insight into factors that may lead to unusual trading behavior/flipping during the first day of listing. Originality/value Despite several studies on events (e.g. short- and long-term price performance) around IPO, there is little evidence on how privatized IPOs affect flipping activity, which is a high volume of trading immediately after listing.

show abstract

Impact of pricing mechanism on IPO oversubscription: evidence from Pakistan stock exchange

Cited by 28 publications

References 42 publications

Determinants of oversubscription of SME IPOs in India: evidence from quantile regression

Determinants of oversubscription of SME IPOs in India: evidence from quantile regression

Pricing Mechanism and IPO Initial Return: Evidence from Pakistan Stock Exchange

Moderating effect of investor demand: privatized IPOs and flipping activity in the Pakistan IPO market

Contact Info

Product

Resources

About