Transparent bookbuilding, certification and initial public offerings

Arif Khurshed, Stefano Paleari, Alok Pande and Silvio Vismara

Journal of Financial Markets, 2014, vol. 19, issue C, 154-169

Abstract: India has the unique distinction of being the only country that releases information on the IPO bookbuilding process live to investors. Against this backdrop, we investigate the role this mechanism plays in generating investor interest during the bookbuilding process and the subsequent performance of IPOs in the immediate aftermarket. We show that, to retail investors, institutional bids in the early days of the bookbuilding process offer a coherent signal about the quality of the IPO. IPOs with high levels of institutional demand in the early days of the book also see high levels of bids from retail investors in the later days of the book. Large subscriptions have a strong positive effect on initial returns. Known certification mechanisms, such as the reputation of the sponsor, VC affiliation and IPO grading, are of limited importance in the Indian IPO market.

Keywords: Certification; IPOs; Bookbuilding; Grading; Underpricing; Signals; India (search for similar items in EconPapers)
JEL-codes: G11 G15 G18 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:19:y:2014:i:c:p:154-169

DOI: 10.1016/j.finmar.2013.12.001

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