IPO’s Deliberate Underpricing in JSE Main Board; Application of Bayesian Stochastic Frontier Model

Samuel Wainaina and Makgopa Tshehla

Journal of Accounting and Finance in Emerging Economies, 2026, vol. 12, issue 1, 127-140

Abstract: Purpose:&JSE as a primary market for equity has expended efforts to protect investors and increase market efficiency through stringent listing requirements in main board. This paper assessed the prevalence of deliberate underpricing, a form of market inefficiency in JSE main board.Design/Methodology/Approach: . The studied firms were issuing firms that offered IPOs between 2000 and 2018 and actively traded firms with market capitalisation exceeding ZAR 10 billion. A Bayesian stochastic frontier model was used to assess prevalence and magnitude of IPO deliberate underpricing.Findings and Implications &The study found deliberate underpricing is prevalent in JSE main board and, total assets and EBITDA are the key determinants of pricing efficiency. The recommendation is JSE to increase its efforts in improving financial literacy and investment decision-making skills among individual investors, and enhance market transparency by requiring issuing firms to offer comprehensive financial and non-financial disclosures relating to their operations.

Keywords: Bayesian stochastic frontier model; Pricing factors; Deliberate underpricing; IPO; JSE (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:src:jafeec:v:12:y:2026:i:1:p:127-140

DOI: 10.26710/jafee.v12i1.3695

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