Title: Post-issue promoter groups holding, signalling and IPO underprice: evidence from Indian IPOs

Authors: Seshadev Sahoo, Prabina Rajib

Addresses: Vinod Gupta School of Management, Indian Institue of Technology (IIT), Kharagpur, West Bengal 721 302, India. ' Vinod Gupta School of Management, Indian Institue of Technology (IIT), Kharagpur, West Bengal 721 302, India

Abstract: This paper attempts to specify the relationship between post-issue promoter groups| retention and Initial Public Offering (IPO) underprice. We also investigate the impact of signalling and financial variables, i.e. offer size, times subscribed, age of the firm, book value, leverage, market volatility and ex-ante uncertainty along with post-issue promoter groups holding on IPO underprice. On using a sample of 92 IPOs, we find IPOs are underpriced at an average of 46.55% during 2002 to 2006. We document a positive relationship between post-issue promoter group holding and IPO underprice. Our results indicate offer size, times subscribed and post-issue promoter group holding are statistically significant in explaining underprice. We also document positive initial day return for IPOs across all industries, while manufacturing sector IPOs are less underpriced than non-manufacturing sector IPOs.

Keywords: IPO underprice; initial public offering; post-issue promoter groups holding; signalling; offer size; age; book value; ex-ante uncertainty; times subscribed; leverage; volatility; India; manufacturing IPOs.

DOI: 10.1504/IJFSM.2010.032434

International Journal of Financial Services Management, 2010 Vol.4 No.2, pp.95 - 113

Available online: 02 Apr 2010 *

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