What determines IPO underpricing ? Evidence from a frontier market

Abdelkader Boudriga, Sarra Ben Slama and Neila Boulila

MPRA Paper from University Library of Munich, Germany

Abstract: This paper empirically analyzes the short run performance of Tunisian initial public offerings (IPO). It sheds light on the determinants of IPO’s in a context of a frontier market characterized by high information asymmetry, low information efficiency, thin trading and the presence of “noise” traders. Using a sample of 34 Tunisian IPO’s from the period 1992-2008, we find that the average market adjusted initial return for the first three trading days is about 17.8 percent. The level of underpricing is related to retained capital, underwriter’s price support, oversubscription, listing delay and the offer price. Age of the firm, its size and the size of the offer do not seem to reduce the amount of money left on the table by issuers. It appears also that underpricing is driven by irrational investors (ipoers) seeking for short-run capital gains. These results remain unchanged after controlling for the presence of institutional investors and the existence of liquidity contract.

Keywords: Initial public offerings; Short-run underpricing; Underwriter’s price support. (search for similar items in EconPapers)
JEL-codes: G11 G14 (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-ara and nep-cfn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:18069

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