Does prospectus information matter in IPO pricing?

Rasidah Mohd-Rashid, Mansur Masih, Ruzita Abdul-Rahim and Norliza Che-Yahya

Journal of Islamic Accounting and Business Research, 2018, vol. 9, issue 4, 514-530

Abstract: Purpose - The purpose of this study is to identify selected information from the prospectus that might signal the initial public offering (IPO) offer price. Design/methodology/approach - This study uses cross-sectional data for a 14-year period from 2000 to 2014 in examining hypotheses relating toShariah-compliant status, institutional investors, underwriter ranking and shareholder retention, with respect to their associations with the offer price of the IPOs. Further, this study uses ordinary least squares (OLS) for all models, including the models for both subsamples ofShariah- and non-Shariah-compliant IPOs. As for robustness, this study incorporates the quantile regression and quadratic model. Findings - The results tend to provide support for the argument that firms withShariah-compliant status reflect lower uncertainty and project better signalling of quality due to greater scrutiny by the government and thus are able to offer IPOs at higher prices. Similarly, firms with a higher proportion of shareholder retention indicate lower risks as insiders forego their options to diversify their portfolio, and hence could price their IPOs higher. Finally, the involvement of institutional investors and higher underwriter ranking could be used by firms to disregard information asymmetry, and therefore, the issuer might have to discount the IPO offer price. Research limitations/implications - This study focuses solely on information in the prospectus that should not be disregarded by the investors in valuing the appropriateness of the IPO offer price. This study contributes in terms of providing a better understanding of the determinant factors of the IPO offer price of the firms which areShariah-compliant. Originality/value - This paper provides evidence for the determinants of the IPO offer price in a fixed pricing mechanism for bothShariah-and non-Shariah-compliant IPOs.

Keywords: Shariah; Quantile; Fixed price; Malaysian IPOs; Offer price; Quadratic (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:jiabrp:jiabr-10-2017-0146

DOI: 10.1108/JIABR-10-2017-0146

Access Statistics for this article

Journal of Islamic Accounting and Business Research is currently edited by Dr Mohammad Hudaib and Prof Roszaini Haniffa

More articles in Journal of Islamic Accounting and Business Research from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().