What drives the oversubscription of IPO’s: evidence from Indian Stock Market

Dr. Aniruddha Das, Dr. Amith Vikram Megaravalli and Dr. A. Sarath Babu
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Dr. Aniruddha Das: Calcutta Institute of Engineering and Management, Kolkata
Dr. Amith Vikram Megaravalli: Institute of Management Technology, Hyderabad
Dr. A. Sarath Babu: Institute of Management Technology, Hyderabad

Theoretical and Applied Economics, 2023, vol. XXX, issue 4(637), Winter, 47-62

Abstract: The paper’s objective is to measure the drivers of oversubscription of Initial Public Offerings (IPOs) in India. Data from cross-sections are used in the investigation to analyse 179 IPOs issued from Jan 2009 to Dec 2020 and listed on Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) to examine the essential causes of IPO oversubscription. The study uses least square regression, robust regression and quantile regression approach to study the imperative factors of oversubscription of IPOs in India. The findings of the study suggest that issue price, underwriter’s reputation showed positive and significant association with oversubscription and listing delays and pricing mechanism showed negative and significant association with oversubscription. For the purpose of understanding the causes of oversubscription, the current study is restricted to a small number of variables. Future studies should include more variables like macro-economic variables which effects the oversubscription of IPOs. The study's conclusions have repercussions for academics, financial advisors, and regulators. It provides useful insights to researchers by listing the factors effecting the oversubscription of IPOs in emerging markets like India. By investigating the connection, this study adds something new to the body of literature on initial public offerings by examining the relationship between pre-IPO firm action like issue price, issue size, price mechanism, listing delay, underwriter’s reputation, boom market, oversubscription and undersubscription from the context of emerging markets like Indian and during post global financial crisis.

Keywords: Oversubscription; IPO’s determinants; Indian stock market. (search for similar items in EconPapers)
Date: 2023
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