Initial public offering price support, valuation, and returns

Tütüncü, Lokman

doi:10.1007/s40822-018-0124-2

Cited by 10 publications

(7 citation statements)

References 21 publications

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“…The dependent variable is IPO underpricing, which is measured as the difference between the first listing day's closing price and the issue price, divided by the issue price (Tutuncu, 2020;Mehmood, et al, 2020b). Further, because the first listing day's closing price includes market noises, the first listing day's opening price is also used to calculate IPO underpricing (Mohd-Rashid et al, 2017;Mohd-Rashid et al, 2014).…”

Section: Empirical Modelmentioning

confidence: 99%

Shariah-compliance and IPO underpricing: evidence from Pakistan Stock Exchange

Mehmood

Mohd‐Rashid

Tajuddin

et al. 2021

IMEFM

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Purpose This study aims to investigate the effect of Shariah-compliant status and Shariah regulation on initial public offering (IPO) underpricing in Pakistan. Design/methodology/approach Besides the ordinary least square’s method, this study used quantile least squares as a robust approach and stepwise regression for further analysis to investigate the underpricing phenomenon in Pakistan. Data of 84 IPOs listed on Pakistan Stock Exchange from January 2000 to December 2018 were collected to determine the impact of Shariah-compliant status and Shariah regulation on IPO underpricing. Findings Results of the study show that Shariah-compliant status has a negative relationship but Shariah regulation has a positive relationship with IPO underpricing. Hence, it is contended that Shariah-compliant firms have lower asset volatility and uncertainty than non-Shariah-compliant firms because of less information asymmetry, resulting in lower underpricing. These Shariah-compliant firms provide signals of high-quality IPOs as they must comply with the strict guidelines issued by the Securities Exchange Commission of Pakistan in addition to being considered as amicable by investors. Further, this study suggests that investors are more attracted to Shariah-compliant firms than non-Shariah-compliant ones. Research limitations/implications This study’s offers limited consideration of nonfinancial and financial characteristics that could influence the decision of investors to subscribe to IPOs. Besides, future studies could consider the screening benchmarks; for instance, debt and cash may explain the intensity of IPO initial return in Pakistan. Originality/value The present work empirically investigated the influence of Shariah-compliant status and Shariah regulation on IPO underpricing in Pakistan’s IPO market, which has been scarcely covered in the existing literature.

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Section: Empirical Modelmentioning

confidence: 99%

Shariah-compliance and IPO underpricing: evidence from Pakistan Stock Exchange

Mehmood

Mohd‐Rashid

Tajuddin

et al. 2021

IMEFM

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“…The main market is where corporations perform initial public offerings (IPOs) (Kristiantari, 2013a). An initial public offering (IPO) is a requirement for issuers selling their stock on the stock exchange for the first time (Tutuncu, 2020). An initial public offering (IPO) is carried out by a business to receive funds from the public, where the funds are used for corporate purposes and must conform with the legislation on issuing shares to the public, with Law No.…”

Section: Introduction *mentioning

confidence: 99%

Determinan on Underpricing at The Initial Public Offering: Evidence Indonesia Stock Exchange

Abbas

Rauf²,

Hidayat³

et al. 2022

Quant. Econ. Manag. Stud.

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The purpose of this study is to see how company size, earnings per share, profitability, financial leverage, and underwriter reputation affect underpricing during the initial public offering of companies listed on the Indonesia Stock Exchange (IDX). This study's object was selected utilizing a purposive sample approach with numerous provisions. Non-banking firms that conducted initial public offerings (IPOs) on the Indonesia Stock Exchange (IDX) between 2015 and 2019 were researched. Ninety-eight non-banking firms were collected as study samples from a total of 141. This is due to the fact that there are six banking businesses, sixty-two companies do not meet the requirements for inclusion in this study data, and thirteen companies do not exhibit underpricing. Two firms were relisted and delisted. Based on the findings of data analysis research, low earnings per share will also make investors not interested in buying shares of the company. So the company's level of uncertainty will increase. Underwriters also know more and more complete information about the market so that issuers are needed to determine primary market prices and investors to consider investing in the capital market. Meanwhile, the level of underpricing cannot be measured by the level of ROA generated by a company and the distrust of investors towards the financial statements produced by companies that conduct IPOs. DER cannot be used as a benchmark in considering the initial return expected by investors based on the findings of data analysis research. the author assumes investors' incompetence in analyzing a company's performance and relies solely on the stock price offered. The phenomenon of stock price underpricing caused by limited information about companies conducting initial public offerings (IPOs) motivates the authors to conduct this research to determine whether the information available in financial statements and information surrounding investors can be used as benchmarks in determining investment decisions. and calculate a stock's initial rate of return.

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“…Research on emerging markets such as Turkey tends to face obstacles to access quality data and evidence on the disclosure of Turkish IPOs is scarce. This study adds to the recent studies that rely on IPO prospectus disclosure to gauge IPO valuation and performance in emerging markets (Mohd-Rashid et al, 2018;Ong et al, 2020;Tutuncu, 2020aTutuncu, , 2020b.…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 95%

Allocation discretion, price discounts and returns in Turkish initial public offerings

Tütüncü

2021

IMEFM

Self Cite

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Purpose This study aims to investigate whether underwriters exercise their allocation discretion to offer favorable discounts to institutional investors. Design/methodology/approach The research covers 173 offerings at Borsa Istanbul between 2010 and September 2021. Two hypotheses related to allocation discretion are developed and tested by means of probit, ordinary least squares and two-stage least squares regressions. Heckman selection regressions are used for robustness tests. Findings Allocation discretion is catered toward institutional investors who account for more than 56% of all initial allocations adjusted by gross proceeds. Close to 84% of all gross proceeds come from offerings that allocation discretion is exercised. These discretionary offerings are sold with larger price discounts, yet provide lower initial returns, while evidence points to reallocation to retail investors due to weak demand from institutional investors. Research limitations/implications Despite using the population of firms in the research period, the sample size is small relative to more developed markets. The research period cannot be extended because allocation discretion is allowed in 2010. Practical implications The research highlights the importance of institutional and foreign investors to the equity markets. This issue is relevant due to the ongoing flight of foreign investors from emerging economies and the increasing participation of small investors in the stock markets. Social implications The study cautions retail investors against greater (re)allocations by underwriters who may seek to compensate for the loss of their foreign investor base and urges policymakers to regain foreign investors. Originality/value To the best of the authors’ knowledge, this is the first research paper to use actual discounts disclosed in the prospectus to test the predictions related to allocation discretion. The study also contributes to the emerging markets literature by documenting allocation practices of the Turkish underwriters for the first time.

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Initial public offering price support, valuation, and returns

Cited by 10 publications

References 21 publications

Shariah-compliance and IPO underpricing: evidence from Pakistan Stock Exchange

Shariah-compliance and IPO underpricing: evidence from Pakistan Stock Exchange

Determinan on Underpricing at The Initial Public Offering: Evidence Indonesia Stock Exchange

Allocation discretion, price discounts and returns in Turkish initial public offerings

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