Valuation of IPOs in India-An Empirical study

Sanjay Sehgal and Bhushan Kumar Sinha ()

Business and Economic Research, 2013, vol. 3, issue 2, 183-204

Abstract: In this paper, we examine two main propositions for Indian Equity Market: (i) important factors that determine short-run underpricing of initial public offerings (IPOs) (ii) impact of IPOs¡¯ mispricing on investment banks¡¯ reputation. Data is employed for 432 new IPO issues for India from April, 2001 to December, 2011. We find that 5 variables i.e. number of times an IPO issue subscribed, number of uses of IPOs¡¯ proceeds, Listing Delay, Industry PE ratio and dummy for companies representing new economies are positively related to the short run initial return on IPOs, while 4 variables, i.e. company size , investors¡¯ sentiment , investment banks¡¯ reputation defined in terms of share in IPO proceeds and dummy for private companies¡¯ IPOs bear a negative relationship with initial return. The IPOs seems to be overpriced and the Indian market takes about 6 months to fully incorporate information for discovering the fair value of IPOs. Mispricing of IPOs seems to negatively impact the investment banks¡¯ reputation in the next period. Our results are in conformity with the previous findings of developed market. The findings of this research have strong implications for the policy makers, market intermediaries as well as investors. The present study contributes to the capital market literature, especially for emerging economies.

Keywords: IPO; Underpricing; Investment Banks; Investor¡¯s sentiment; Short-run initial return (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.macrothink.org/journal/index.php/ber/article/view/4585/4142 (application/pdf)
http://www.macrothink.org/journal/index.php/ber/article/view/4585 (text/html)

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:mth:ber888:v:3:y:2013:i:2:p:183-204

Access Statistics for this article

Business and Economic Research is currently edited by Daisy Young

More articles in Business and Economic Research from Macrothink Institute
Bibliographic data for series maintained by Technical Support Office ( this e-mail address is bad, please contact ).