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

Vijaya B. Marisetty and Marti G. Subrahmanyam

Journal of Financial Markets, 2010, vol. 13, issue 1, 196-223

Abstract: We document the effects of group affiliation on the initial performance of 2,713 initial public offerings (IPOs) in India under three regulatory regimes during the period 1990-2004. We distinguish between two competing hypotheses regarding group affiliation: the "certification" and the "tunneling" hypotheses. We lend support to the latter by showing that the underpricing of business group companies is higher than that of stand-alone companies. Furthermore, we find that the long-run performance of IPOs, in general, is negative. We also find that Indian investors over-react to IPOs and their over-reaction (proxied by the oversubscription rate) explains the extent of underpricing.

Keywords: Initial; public; offering; (IPO); Underpricing; Business; groups; Certification; Tunneling (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (31)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:13:y:2010:i:1:p:196-223

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