effect of market crisis of financial efficiency on underpricing_ an var overview of indian ipos

7/31/2019 Effect of Market Crisis of Financial Efficiency on Underpricing_ an VAR Overview of Indian IPOs

1/19

European Journal of Business and ManagemISSN 2222-1905 (Paper) ISSN 2222-2839 (

Vol 4, No.14, 2012

Effect of Market Cri

an V

Rohit

Indian Institut

Phone: +

Indian Institut

Phone: +9

Abstract

This paper attempts to design for a

capabilities. Which are interactinglevel of underpricing after the Indi

stock exchange given that April-20

the relationship between all indepe

results of VAR display that variable

the level of Market adjusted return

theless, ROCE and RONW have a

cates 49% R2and 32% adjusted R2.

fied the assumptions of Akaike inf

verify stationary of time series and

cate, there is no heteroskedasticity p

Key words: IPOs, Post market cris

cific factors, market related variableJEL: G14, G32, G12

1. IntroductionThe underpricing of IPOs is anomal

In particular, one would expect the

investors will recognize the implied

of IPOs seems to be persistent in m

of existing owners to sell shares to

developed and developing markets

There are a number of theoreti

justifications for this observed phen

in the form of ex ante uncertainties

1989) and other similar studies, th

underpricing their listed IPOs. Mo

theories, investor sentiment theorie

ket.

The empirical evidence on t

(Megginson and Weiss, 1991), sugg

er hands, (Kay, 1986), documented,

IPO affects the value of the firm, a

1994), (Allen and Faulhaber, 1989

which intend to make subsequent

(Rock, 1986) and (An & Chan, 200

advisers are better informed about t

visers provide underwriting, marketas to reduce the selling effort and t

continuously exploring various face

(Rock, 1986), winner curse model,

ntnline)

1

sis of Financial Efficiency on

R Overview of Indian IPOs

ansal (corresponding author),Research scholar

e of Technology, Roorkee, Uttrakhand, India 24700

19927285001 Email: [email protected]

[email protected]

Dr. Ashu Khanna, Asst Professor

e of Technology, Roorkee, Uttrakhand, India 24700

19756972391 Email: [email protected]

nd tests empirical models, which integrate theoretic

o explain financial efficiency, i.e. several financialn stock market crunch? The study is founded on IP

08 to Dec-2011. VAR (vector autoregressive analysi

ndent variables with the dependent variable, i.e. lev

of DEBTQ, APATM, ROCE and RONW have a cons

ratio (MARRO), AND VAR indicates 46% R2

and 3

significant difference in the level of traditional under

However, in the mutually of a case i.e. LOGMAAR

rmation criterion and Schwarz's criterion. We execu

autocorrelation function. Durbin Watsons value subs

roblem exist for the model?

is, ownership structure, share holding pattern, BSE,

s.

ous in the sense that it appears to contradict the effici

nderpricing of IPOs to disappear over time as the ov

profit opportunities and make good use of them. Ho

ost markets. Furthermore, it would be hard to ration

outsiders at discounted ices. The fact that these anom

akes them even more demanding to explain.

al explanations and models underpinning this IPO un

omenon rest upon the possible existence of informati

about share prices. Also, according to (Welch, 1989),

re exists a signaling mechanism where firms send si

eover, there are other possible explanations such as

and prospect theories to explain the degree of under

he performance of private and government firms

ested that privatized firms perform better than their c

which is supportive of government enterprise. The a

s well as the initial returns available to its subscribe

), explained underpricing as a signaling device use

quity issues to distinguish themselves from the othe

8), proposed non signaling explanations for underpri

e equilibrium price of an issue than the issuing com

ing, and price. Baron examines that they have an ince chance that they will left with unsold shares. Mos

s of the pricing mechanism to find suitable explanati

information revelation theory by (Benveniste & Spin

www.iiste.org

nderpricing:

1

1

l and firms economic

liquidity ratios at thethat listed at Bombay

) is used to distinguish

l of underpricing. The

equential association at

% adjusted R2. Never-

pricing, and VAR indi-

& LOGUNDER veri-

ted unit root testing to

isted 1.58. Which indi-

nderpricing, firm spe-

nt markets' hypothesis.

rwhelming majority of

ever, the underpricing

lly justify the behavior

alies exist in numerous

derpricing. The popular

n asymmetries, mainly

(Benveniste & Spindt,

ignals to the market by

underwriter reputation

ricing in the IPO mar-

is also inconclusive.

unterparts. On the oth-

curacy of pricing of an

rs. (Loughran & Ritter,

by high-quality firms

r firms. (Baron, 1982),

cing. In barons model,

any and investors. Ad-

entive to underprice sot of the researchers are

ns for the underpricing.

dt, 1989), price stabili-


2/19


Vol 4, No.14, 2012

zation theory byRudd (1993), tried

the winners cursemodel based on

entice uninformed investors, compa

The remainder of the paper pr

derpricing, and section 3 elaborates

ses. Section 5 introduces our datadependent variable and all indepen

association between the IPO underp

1.1 Role of BSE in book buildinBSE suggests the book building se

work. This system is one of the lar

cities through over 7000 trader wor

ated through book-runners of the is

member brokers on behalf of them

syndicate members, and the informa

transparency, the software gives vis

1.2. Why IPO Underpricing

An initial public offering (IPO) iss

single investment bank or group of

(institutional & non-institutional) in

per share (issue price) while the inv

intermediaries help in matching the

ious other functions like certifying t

Exchange Board of India (SEBI), d

responsibilities.

1.3. Theories and models of underThus, according to the winners cu

between informed and uninformed

pricing for IPOs of financial instituFaulhaber, 1989) asymmetric infor

firm, liquidity ratios, financial effici

firms, firm performance (McDonal

and Khanna, 2012) determinants of

(Leite, 2007), generalized the i

and conjectures that the standard m

showed that high (low) market retur

create a negative relation between t

tive relation between market returns

(Dolvin and Jordon, 2008), ad

affect pre-existing shareholders. Th

retention, which effectively offsetsis stable over time, unlike underpric

nificant determinants of the cost of

(Kumar, 2010), examines the

tapped the primary market during

i.e., including both direct as well a

neither better nor worse using eith

issue expenses associated with boo

ling for issue size and firm specific

(Bansal and Khanna, 2012), a

level of underpricing of IPOs that

option. They found that the magnit

different results. They found signi

through book build with those that a

2. Research objectives1) To measures, the IPOs ini

ntnline)

2

to give reasons for the Underpricing phenomenon. (

the information asymmetry between informed and u

ies underpriced new issues so that after market price

ceeds as follows. Section 2 discusses the theories an

the empirical evidence regarding literature. Section

nd sample. Section 6 analyzes VAR regarding IPOent variables. Section 7 addresses the results. And

ricing and independent variables. Section 9 concludes

g process

vices through the book building software that runs

gest electronic book building networks anywhere sp

k stations via leased lines, VSATs and campus LAN

sue and by the syndicate member brokers. Through t

selves or their clients' place orders. Bids are placed

tion is collected on line real-time until the bid date en

al graphs displaying price v/s quantity on the termina

e process requires the active involvement of three

investment banks (for underwriting & marketing the

tending to buy shares. The issuing firm wants to obt

stors want to buy the shares at a minimum price. Inv

opposite expectation of both the parties. Investment

he economic rationale of the issue to regulatory bodi

ciding the issue price, allocating shares to investors

ricing

rse theory, IPO underpricing should decrease if the i

investors is reduced. Empirical studies have found e

tions is related to proxies for asymmetric informatioation(Ibbotson, 1975) Offer size (Megginson and

iency (Muscarella and Vetsuypens, 1989) market capi

and Fisher, 1972), (Baker and Wurgler, 2007), Pric

PO underpricing.

nformational assumptions of the (Rock, 1986) to add

del based on informed and uninformed investors is

ns induces the issuer to price the issue more conserva

he public signal and the quality of the marginal inve

and underpricing.

ressed the question of whether or not periods of high

y found that high levels of underpricing are associat

uch of the potential cost. Overall, the percentage ofing itself. Also many factors known to be related to u

oing public to pre-existing owners.

efficiency of IPO issuing mechanisms using a sam

003-07 by taking in to consideration the total costs t

indirect costs. He finds that from a total cost point

r book building or the fixed price offers. Their resul

building is more than those associated with fixed pr

haracteristics.

alyzes that whatever there is any significant differen

riced through book build with those that are priced

de of underpricing is concerned; the book-build and

icant difference in level of magnitude of underprici

re priced through the fixed price option.

ial performance on first trading day at Bombay stoc

www.iiste.org

ock, 1986), developed

informed investors. To

exceeds the offer price.

models about IPO un-

develops the hypothe-

underpricing includingection 8 considers the

the paper.

n the BSE private net-

nning over 350 Indian

. The software is oper-

his book, the syndicate

electronically through

ds. In order to maintain

ls.

ey players: the firm, a

IPO), and the investors

ain the maximum price

estment banks acting as

anks also perform var-

es like the Securities &

and other issue specific

information asymmetry

idence that the under-

. Signaling(Allen andeiss, 1991) age of the

talization, credibility of

ing mechanism (Bansal

ress empirical evidence

nable to address. They

tively (aggressively) to

tor, and in turn a posi-

underpricing adversely

ed with increased share

shareholder wealth lostnderpricing are not sig-

le of Indian IPOs that

he issuers have to face

f view the issuers fare

ts also showed that the

ice offers after control-

ce in the magnitude of

through the fixed price

fixed price option gave

ng in IPOs that priced

exchange from (April


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Vol 4, No.14, 2012

2008 to Dec-2011).

2) To analysis, the diverse fscription pattern) that affe

crisis. And to distinguish t

3. Research MethodologyThe data is analyzed using multiplethe underpricing. Empirical studies

related to proxies for asymmetric i

Weiss, 1991), age of the firm(Musc

ty ratios, firms profitability, (McDo

with IPO underpricing, Offer timin

(Singh & Mittal, 2003).

1.2 Measures for VariablesThe variables used in the study hav

1.2.1 Measure of underpricingConsistent with the standard metho

price to the closing price in the seco

Traditional underpricing = ((closi

Log underpricing = ln (P1-P0/P0)

Log Underpricing = ln (closing pri

standard practice and to avoid h

(MAARO).

Firstly, we have calculated the retur

i security, P1= Price of, i security on

Equation 1Ri= (P1-P0)/P0

Secondly, we have also calculated i

which, Mi= market return on ith da

Equation 2 Mi= (Ii- I0)/ I0

Finally, we have calculated market

Mi from equation (2).Equation 3 MAARO = {100* [(1+

Underpricing is used as dependent v

1.3 Hypothesis ModelOn the basis of empirical studies

variables. We have constructed vari

iables. Two tailed hypothesis test h

the 5% significance level.

Null hypothesis: H0: There is no si

ble i.e. level of underpricing.

1.3.1.1 Debt-Equity Ratio (D/EDebt- equity ratio indicates the relfinancial stability of the firm. We h

into the natural logarithms to make

D/E Ratio = Long- term Debt / S

H1: There is positive significant ass

1.3.2 Current Ratio (CR)Current ratio is calculated current a

the firm in the short term. We have t

CR= Current assets, Loans & adv

H2: There is negative significant di

1.3.3 Creditors payment period (The measurement of the creditor t

purchased by the company. In gene

mean that the operations of the com

CPP = Average creditor/ credit pu

ntnline)

3

ctors (firms age, number of shares offered, market

ting the dependent variable i.e. degree of underpricin

he association between several financial ratios and lev

linear regressions. To find out which variables are si

ave found evidence that the underpricing for IPOs o

nformation. Liquidity positions, firm efficiency, Off

arella and Vetsuypens, 1989), (Barry & brown, 1985

nald and Fisher, 1972),(Bansal and Khanna, 2012),

from price setting to listing date found negatively re

been measured as described below.

dology, underpricing is calculated as the percentage

ndary market.

g price - offer price) /offer price) * 100

100

ce/ offer price) is used to determine the level of un

eteroskedasticity. We have got marketed adjusted

on, i security, where we have used Ri= (P1-P0)/P0 i

first listing day, P0= offer price of, i security.

index return on corresponding days, where we have

, Ii = closing index at listing day, I0= closing index at

..

adjusted return on security, where we have taken Ri

i)/ 1+Mi)1]}

ariable in this multiple regression model.

Insert Table 1 Description of variables

hich have found evidence that the underpricing for

us hypothesis related to our research problems, rese

s been used to find the significant association betw

nificant difference between independent variables wi

Ratio)tionship between loan funds and new worth of the

ve taken previous Year before issuing IPO year. Aft

tandardized value and to remove the heteroskedastici

hareholders Funds

ociation between Debt- equity ratios with the level of

sets divided by current liabilities. It is indicating the

aken current ratio to reveal liquidity condition of a co

ances / Current Liabilities & Provisions

ference between Current Ratio and the level of under

CPP)

rnover period shows the average time taken to payal the longer the credit period achieved the better, be

any are being financed interest free by suppliers of m

rchase * 365 (in days)

www.iiste.org

capitalization, and sub-

g after the stock market

el of underpricing.

nificant in determining

financial institutions is

r size (Megginson and

, Company size, activi-

ave all been associated

lated with underpricing

change from the offer

.. (1)

. (2)

erpricing and to make

returns on securities

n which, Ri= return on,

(3)

sed Mi= (Ii- I0)/ I0 in

offer day.

(4)

from equation (1) and

.(5)

IPOs with independent

rch objectives and var-

en various variables at

th the dependent varia-

ompany, the long term

rwards we converted it

y.

underpricing.

liquidity & solvency of

mpany.

ricing.

for goods and servicescause delay in payment

aterials.


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Vol 4, No.14, 2012


1.3.4 Debtors turnover ratioDebtors turnover, which measures

er the company has been efficient in

position. We converted it into the na

DV = Credit sales/ Average DebtoH4: There is positive significant lin

1.3.5 Fixed Assets to long termThis ratio indicates the proportion

assets minus depreciation. Neverthe

FALTF = Fixed Assets / Long- ter

H5: There is positive significant dif

pricing.

1.3.6 Interest coverage ratioThe interest coverage ratio shows h

payment of interest. A very high rat

excessive use of debt.

ICR = Profit before Interest, Dep


1.3.7 Inventory turnover ratioA considerable amount of a compan

and finished goods. We converted it

ITR = Cost of Goods sold or sales

H7: There is positive significant dif

1.3.8 Profit before DepreciationTotal profit before depreciation &

payment. However, we converted it


derpricing.

1.3.9 Profit before interest depreTotal profit before interest, deprecia

on equity. However, we converted

heteroskedasticity.


of underpricing.

1.3.10 Profit before interest and tTotal profit before interest & tax tha

However, we converted it into the n

H10: There is negative significant

pricing.

1.3.11 Return on capital employThis ratio is also called as return on i

on capital. We converted it into the

ployed.

ROCE = Net profit / Capital empl

ROCE = Net profit / sales * sales /

H11: There is positive significant di

1.3.12 Return on net worthThe ratio expresses the net profit i

performance for equity shareholder

RONW = Net profit after interest an


1.3.13 Profit after interest and taxTotal profit after interest & tax that

ntnline)

4

ference between Creditors payment period and the lev

hether the amount of resources tied up in debtors, is

converting debtors into cash. The higher the ratio is i

tural logarithms.

sbetween Debtors turnover ratio and the level of unde

funds ratio

f ling term funds deployed in fixed assets. Fixed as

less, fixed assets are good scale to measure the long r

funds

erence between fixed assets to long term funds ratio

ow many times interest charges are covered by fun

io indicates that the firm is conservative in using debt

eciation and tax / Interest

ference between Interest coverage ratios with the leve

ys capital may be tied up in the financing of raw mat

into the natural logarithms.

/ Average Inventory

erence between Inventory turnover ratio and the level

and taxation

ax that has been recorded before finalizing interest

into the natural logarithms to make standard value.

ociation between profit before depreciation and taxat

ciation and taxation

tion & tax has been recorded before finalized interes

it into the natural logarithms to make standard va

ciation between profit before interest, depreciation an

axation

t has been recorded before finalizing interest on debts

tural logarithms to remove the heteroskedasticity.

ifference between profit before interest and taxation

d

investment (ROI). The strategic aim of a business ente

natural logarithms to remove the heteroskedasticity.

oyed

Or

Capital employed

fference between Return of capital employed and the l

terms of equity shareholders funds. This ratio is an

since it indicates the return on the finished employed

d tax / net worth * 100

ifference between Return on net worth and the level o

has been recorded after finalizing interest on debts

www.iiste.org

el of underpricing.

reasonable and wheth-

indicating the better the

rpricing.

sets represent the gross

n efficiency.

ith the level of under-

s that are available for

and low ratio indicates

l of underpricing.

erials, work in progress

of underpricing.

on debts and make tax

ion and the level of un-

on debts, depreciation

lue and to remove the

d taxation and the level

and make tax payment.

and the level of under-

rprise is to earn a return

Net profit/ capital em-

evel of underpricing.

important yardstick of

by them.

underpricing.

nd make tax payment.


5/19


Vol 4, No.14, 2012

However, we converted it into

heteroskedasticity.

H13: There is positive significant di

1.3.14 Long Term Debt-Equity RaThe ration compares long term debt

assets. This ratio would be of moreconverted it into the natural logarith

LTDE = Long- term debt / Shareh


Estimation Proc:

=========================

EC(C,1) 1 2 LOGMAARO LO

LOGDEBTORS LOGFIXDAST

LOGROCE LOGRONW LOGTER

VAR Model estimation

D(LOGMAARO) =A(1,1)*(B(1,1)*LOGMAARO(-1)

C(1,2)*D(LOGMAARO(-2)) + C

C(1,6)*LOG_DEBEQ + C(1,7

C(1,10)*LOGDEBTORS+ C(1,11)

C(1,14)*LOGPBDTM + C(1,15

C(1,18)*LOGRONW + C(1,19)*L

D(LOGUNDER) =

A(2,1)*(B(1,1)*LOGMAARO(-1)

C(2,2)*D(LOGMAARO(-2)) +

C(2,6)*LOG_DEBEQ + C(2,7

C(2,10)*LOGDEBTORS+ C(2,11)C(2,14)*LOGPBDTM + C(2,15

C(2,18)*LOGRONW + C(2,19)*L

5.0 Data collection and result anal

The data for the study was

http://www.bse-india.com/IPO und

from CMIE & Capital line database

Dec 2011. BSE was selected for thi

volumes.

Insert Table 2 Magnitude of initia

Insert Table 3 Descriptive results

independent variables

Insert Figure 1 Details for IPOs li

Insert Figure 2

Insert Table 4 unit root test by KP

Insert Table 5 VAR results showiiables

Insert Table 6 Results of null hyp

ntnline)

5

the natural logarithms to make standard value

fference between profit after interest and tax and the l

tio

to the new worth of the firm i.e the capital and free

interest to the contributories of long term finance to tms to make standardized value and to remove the het

olders net worth

ifference between long term debt- equity ratio and the

=====

UNDER @ LOG_DEBEQ LOGAPATM LOG

OGINTCVR LOGINVNTRY LOGPBDTM LOG

DEBTE

B(1,2)*LOG UNDER(-1) + B(1,3)) + C(1,1)*

(1,3)*D(LOGUNDER(-1)) + C(1,4)*D(LOG UN

*LOGAPATM + C(1,8)*LOGCPM + C(1,9

*LOGFIXDAST + C(1,12)*LOGINTCVR + C(1,

)*LOGPBIDTM + C(1,16)*LOGPBITM +

GTERMDEBTE

+ B(1,2)*LOGUNDER(-1) + B(1,3)) + C(2,1)*

(2,3)*D(LOGUNDER(-1)) + C(2,4)*D(LOGUND

*LOGAPATM + C(2,8)*LOGCPM + C(2,9

*LOGFIXDAST + C(2,12)*LOGINTCVR + C(2,)*LOGPBIDTM + C(2,16)*LOGPBITM +

GTERMDEBTE

ysis

btained from the website of the Bombay st

r the heading of book building in IPOS. We also s

. The period for which the data was taken for the stu

study because it is the largest exchange in the countr

public offer at Bombay stock exchange (2000-201

of all variables i.e. dependent variable such as LO

ted at Bombay stock exchange

SS

g relationship between dependent variable with o

thesis @ 5% significance level t= 1.64 one tailed te

www.iiste.org

and to remove the

vel of underpricing.

reserves less intangible

he firm. Afterwards weroskedasticity.

level of underpricing.

CPM LOGCURRNTR

BIDTM LOGPBITM

(LOGMAARO(-1)) +

ER(-2)) + C(1,5) +

)*LOGCURRNTR +

13)*LOGINVNTRY +

(1,17)*LOGROCE +

(LOGMAARO(-1)) +

ER(-2)) + C(2,5) +

)*LOGCURRNTR +

13)*LOGINVNTRY +(2,17)*LOGROCE +

ck Exchange (BSE)

pplemented these data

y was Oct 2008 to 31st

y in relations of trading

)

Maaro and all other

ther independent var-

st


6/19


Vol 4, No.14, 2012

Insert Table 7 Results of null hyp

Insert Figure 3

6. Results & findings of VAR by L

Based on the multiple linear VARpreciation & tax, Return on capital

of underpricing by taken LOGMA

level of underpricing at 5 % signifi

nificant negative effect on the level

cant association between current rat

ratio contains no effecton the level

cant dissimilarity between credito

Therefore, null hypothesis 3 is acce

level of underpricing at 5% signific

ble. Therefore, null hypothesis 4 is

ratio and level of underpricing at 5

is no significant dissimilarity bet(t= .64). Therefore, null hypothesis

Insert Figure 4

Insert Figure 5

There is no significant associat

icance level (t= -.34). This reveals t

is accepted. There is no significant

pricing at 5% significance (t= -.36).

between profit before interest, dep

(t= .82). This reveals that profit bef

hypothesis 9 is accepted. There is

underpricing at 5% significance levof underpricing. Therefore, null hyp

capital employed and levelof unde

return on capital employed on the le

There is a significantdissimila

(t= -3.24). However, there is a nega

hypothesis 12 is rejected. There is a

of underpricing at 5 % significance

itive significant effect on the level

cant association between long term

reveals that long term debt equity h

Insert Figure 6

6.1. Results & findings of VAR b

Based on the multiple linear VAR r

return to the net worth show releva

is a significant relationship between

cance level (t value= 2.76). This ex

the level of underpricing. Therefor

turn on net worth and levelof und

effect of return on net worth on the

less, all other variables except RO

However, in that situation null hypo

Insert Figure 7

7.0. Discussion

The results of the numerous VAR an

it was constructed that the variabl

ntnline)

6

thesis @ 5% significance level t= 1.96

OGMAARO

esults it was construct that the variables' debt-equitymployed and return on net worth show significant rel

RO. There is a significant relationship between the d

ance level (t value= -2.05). This examined that debt

of underpricing. Therefore, null hypothesis 1 is rejec

io and level of underpricing at 5% significance level

of underpricing. Therefore null hypothesis 2 is accep

payment period and level of underpricing at 5%

ted. There is no significant association between de

nce level (t= -.61). This reveals that debtors turnov

accepted. There is no significant relationship betwe

significance level (t=-.21). Therefore, null hypothe

een interest coverage ratio and level of underpriciis accepted.

ion between inventory turnover ratio and level of un

hat inventory turnover ratio has not acceptable. Ther

dissimilarity between profit before depreciation and

Therefore, null hypothesis 8 is accepted. There is n

reciation and taxation and level of underpricing at

re interest, depreciation and taxation ratio has not acc

o significant association between profit before inter

el (t=-.011). The rofit before interest and tax contaiothesis 10 is accepted. There is a significantdissimil

rpricing at 5% significance (t= 2.76). However, ther

vel of underpricing. Therefore, null hypothesis 11 is r

ity between return on net worth and levelof underpri

ive effect of return on net worth on the level of under

significant relationship between the profit after inter

level (t value= 1.99). This examined that profit after i

f underpricing. Therefore, null hypothesis 13 is rejec

ebt equity and level of underpricing at 5% significan

s not acceptable. Therefore, null hypothesis 14 is acc

LOG UNDER

esults it was constructed that the variables' Return o

t relationship at the level of underpricing by capture

the return on capital employed and the level of und

amined that return on capital employed has the signi

, null hypothesis 11 is rejected. There is a weighty di

rpricing at 5% significance (t= -2.80). Notwithstand

level of underpricing. As a result, null hypothesis 1

CE & RONW have no significant association at th

hesis is approved.

alyses are contained in Table 10. Based on the multip

s' debt-equity ratio, Profit after depreciation & tax,

www.iiste.org

ration, Profit after de-ationship with the level

ebt-equity ratio and the

quity ratio has the sig-

ed. There is no signifi-

(t=-.1.14). The current

ted. There is no signifi-

significance (t= -.67).

btors turnover ratio and

r ratio has not accepta-

n fixed assets turnover

sis 5 is accepted. There

ng at 5% significance

erpricing at 5% signif-

fore, null hypothesis 7

tax and levelof under-

significant association

5% significance level

eptable. Therefore, null

st and tax and level of

s no effecton the levelarity between return on

is a positive effect of

jected.

cing at 5% significance

pricing. Therefore, null

st and tax and the level

nterest and tax has pos-

ed. There is no signifi-

ce level (t= -.036). This

pted.

capital employed and

d LOG UNDER. There

rpricing at 5 % signifi-

ficant positive effect of

issimilarity between re-

ing, there is a negative

is declined. Neverthe-

level of underpricing.

le additive VAR results

Return on capital em-


7/19


Vol 4, No.14, 2012

ployed and return to the net worth

LOGMAARO. Nevertheless, Base

Return on capital employed and ret

ing by interpreted LOG UNDER.

The result pointing to the nega

temporary study is in confirmationworth leads to increase in supply of

relationship of return on capital em

with result found by (Bansal and K

ship between offer timing and level

level of underpricing in the present

8.0. Conclusions

Taking into account all firms which

for the period 1999 until 2011, this

ticular, an average underpricing lev

proach, the degree of underpricing i

sis. Nevertheless, there is limited s

ex- ante information and have a mo

evant negative effect on short-run u

significant relationship with other

current ratio and fixed assets ratio a

The results obtained from this

sistent with developed and other

strategy of buying the fresh issues

withstanding, the study also reveals

of the initial returns is found on th

fourth day of trading.

References

1) Allen, F. Faulhaber, G. (1989).ics.23, 303-323.

2) An, H. Chan, K.C. (2008). Cre3) Baker, M. Wurgler, J. (2007). In

129-151

4) Baron, David. P. Bengt, Holmsmetric Information, Delegation

5) Baron, D.P. (1982). A Model oNew Issues. The Journal of Fin

6) Barry, C.B. Brown, S. (1985).Quantitative Analysis. 20, 407

7) Balwinder, Singh. P,K. Mittal. (plied Finance. 9(2), 29-39.8) Bansal, R. and Khanna, A. (201Bombay stock exchange India,

9) Bansal. R and Khanna, R. (201Evidence from 2008-2011. Asi

10) Bansal. R and Khanna, R. (2International Journal of Researc

11) Bansal. R and Khanna, R. (201stock market crisis in 2008

2(8),159-174.

12) Bansal. R and Khanna, R. (201stock market, International jou

13) Bansal. R and Khanna, R. (201Exchange, International journ154-179.

14) Bansal. R and Khanna, R. (201International journal of researc

ntnline)

7

show significant relationship with the level of und

on the multiple additive VAR results it was constru

rn to the net worth show significant relationship with

tive relationship ofreturn on net worth and level of u

of the result construct by in their study. It can be ishare in IPO, leading to lesser underpricing. The resu

ployed and level of underpricing in the present stud

hanna, 2012) in their study.(Singh & Mittal, 2003),

l of underpricing there is no significant relationship

tudy.

completed public on the official market of the Stoc

study examines the evidence on the short-run under-

el within the range 50% is found based on first day.

s explained by the ex-ante uncertainty hypothesis and

pport for the signaling hypothesis. In particular, the

mentous positive impact on the initial returns while t

nderpricing. At the same time, the results show that

xplanatory factors such as Debtor's turnover ratio, c

d the level of underpricing.

study show that fresh issues on the BSE are subjec

merging markets. In this respect, prospective inves

at the offer and selling them immediately on the initi

that investors should not hold new issues very long as

first day of trading and that the average initial retur

Signaling by under pricing in the IPO market. Journa

it Ratings and IPO Pricing. Journal of Corporate Fina

vestor Sentiment in the Stock Market. Journal of Eco

rom. (1980). the Investment Banking Contract for N

and the Incentive Problem. Journal of Finance. 35, 11

the Demand for Investment Banking Advising and

nce. 37, 955-976.

ifferential information and security market equilibriu

422.

2003). Underpricing of IPOs, Indian. Experience. Th

12). Pricing mechanism and explaining underpricing

International journal of research in finance and mark

2), Post Indian stock markets crisis and its impact

an journal of management research, ISSN- 2229-379

12), IPOs underpricing and money left on the ta

h in Management, Economics and Commerce, 2 (6),

), Share holdings pattern and its impact on IPO Un

, Asian journal of research in business, econom

2), Does ownership structure affecting IPO underpr

rnal of business economics and management research

2), IPO underpricing cloud or rain: Even commenci

al of management and Behavioural science, Vol.1,

), Analysis of IPO underpricing: Evidence from Bo

in commerce, it & management, Vol.2, no.8, pp- 01-

www.iiste.org

rpricing by interpreted

cted that the variables'

the level of underpric-

nderpricing in the con-

informed that large netlt is indicating positive

is in the confirmation

Regarding the relation-

etween firms age and

Exchange of Bombay

ricing of IPOs. In par-

Using a regression ap-

the signaling hypothe-

results disclose that the

he signaling has no rel-

there is no statistically

editor payment period,

t to underpricing, con-

tors should pursue the

ial day of trading. Not-

the highest component

ns turn negative on the

l of Financial Econom-

nce. 14, 585-595.

omic Perspectives. 21,

ew Issues under Asym-

151138.

istribution Services for

m. Journal of Financial

e ICFAI Journal of Ap-

of IPOs, evidence from

eting, 2(2), 205-216.

on IPOs underpricing:

, 3 (1), 01-11.

le in Indian market,

106-120.

derpricing: after Indian

ics and management,

icing: A case of Indian

, 3(5), 39-51.

ng from Bombay stock

SSN. 2278- 5671, pp-

mbay stock Exchange,

6.


8/19


Vol 4, No.14, 2012

15) Benveniste, L.M. Spindt, P.A.new issues. Journal of Financial

16) Dolvin, S.D. Jordan, B.D. (20shareholders. Journal of Busine

17) Deb, S. S. Merisetty, V. B. (2012294-2305.

18) Kumar, S.S.S. (2010). Is bookresearch journal of finance and

19) Ibbotson, R.G. (1975). Price p235-272.

20) Loughran, T. Ritter, J.R. (1994).2, 165-199.

21) Loughran, T. Ritter, J.R. (200Review of Financial Studies. 1

22) Leite, T. (2007). Adverse selecnance.13, 813-903.

23) McDonald, J.G. A, K. Fisher. (124) Megginson, W.L. K.A. Weiss.

Finance. 46, 879903.

25) Muscarella, C. J. Vetsuypens,Financial Economics. 24, 1251

26) Rock, K. (1986). Why new issu27) Ritter, J.R. (1991). The Long R28) Sherman, A.E. (2000). IPOs an

Studies.13, 697-714.

29) S, Richard. M, P, Luiz. (2006Global Finance Conference pro

30) Welch, I. (1989). Seasoned offeof Finance.47, 695-732

ntnline)

8

1989). How investment bankers determine the offer

l Economics. 24, 343-361.

08). Underpricing, overhang, and the cost of goin

ss Finance and Accounting. 35, 434-458.

0). Information content of IPO grading. Journal of

building an efficient pricing mechanism? The Indian

economics.38, 173-189.

rformance of common stock new issues. Journal of

Initial Public Offerings: international insights. Pacific

). Why dont issuers get upset about leaving money

, 413-443.

tion, public information, and underpricing in IPOs. J

972). New Issues Stock Price Behavior. Journal of Fi

(1991). Venture capitalist certification in initial publ

. R. (1989). A simple test of Baron's model of IPO u

35.

es are underpriced?. Journal of Financial Economics.

n Performance of Initial Public Offerings. The Journ

long term relationships, an advantage of book buildi

). Underpricing of Brazilian IPOs, Empirical Eviden

ceeding. Rio de Janeiro, Brazil (2006).

ings, imitation costs and the under pricing of initial p

www.iiste.org

price and allocation of

public to pre-exiting

anking & Finance. 34,

evidence. International

inancial Economics. 2,

Basin Finance Journal.

on the table in IPOs?.

ournal of corporate Fi-

ance, 97-102.

ic offerings. Journal of

nderpricing. Journal of

15, 187-212.

l of Finance. 46, 3-27.

g. Review of Financial

ce from 1999 to 2005.

blic offerings, Journal


9/19


Vol 4, No.14, 2012

Appendix- list of tables

Varib

ales

Description Measurement

LOGD

EBEQ

Debt-Equity

Ratio

Debt- equity rati

financial stabilit

into the natural l

LOGA

PATM

Profit after

interest and

tax

Total profit after

However, we c

heteroskedasticit

LOGC

PM

Creditors

payment

period

The measureme

purchased by the

LOGC

URRN

TR

Current Ratio Current ratio is c

the firm in the sh

LOGD

EBTO

RS

Debtors

turnover ratio

Debtors turnove

the company has

LOGF

IXDA

ST

Fixed Assets

to long term

funds ratio

This ratio indica

assets minus dep

LOGI

NTCV

R

Interest cov-

erage ratio

The interest cov

payment of inter

excessive use of

LOGI

NVNT

RY

Inventory

turnover ratio

A considerable a

and finished goo

LOGP

BDT

M

Profit before

depreciation

and taxation

Total profit befo

payment. Howev

LOGP

BIDT

M

Profit before

interest de-

preciation

and taxation

Total profit befo

ciation on equity

value and to rem

LOGP

BITM

Profit before

interest and

taxation

Total profit befo

ment. However,

LOGR

OCE

Return on

capital em-

ployed

This ratio is also

return on capital.

employed.

LOGR

ONW

Return on net

worth

The ratio expres

performance for

after interest and

LOGT

ERM

DEBT

E

Long Term

Debt-Equity

Ratio

The ration comp

assets. This ratio

converted it into

LOG

MAA

RO

Market ad-

justed return

on under-

pricing

We collected ini

We can correcti

logarithms to ma

ntnline)

9

o indicates the relationship between loan funds and new worth o

of the firm. We have taken previous Year before issuing IPO yea

garithms to make standardized value and to remove the heterosked

interest & tax that has been recorded after finalizing interest on

onverted it into the natural logarithms to make standard

.

nt of the creditor turnover period shows the average time taken t

company. Average creditor/ credit purchase * 365

alculated current assets divided by current liabilities. It is indicatin

ort term. We have taken current ratio to reveal liquidity condition o

r, which measures whether the amount of resources tied up in debto

been efficient in converting debtors into cash. We converted it into

es the proportion of ling term funds deployed in fixed assets. Fi

eciation. Nevertheless, fixed assets are good scale to measure the

rage ratio shows how many times interest charges are covered b

st. A very high ratio indicates that the firm is conservative in usin

ebt.

mount of a companys capital may be tied up in the financing of ra

s. We converted it into the natural logarithms.

re depreciation & tax that has been recorded before finalizing int

er, we converted it into the natural logarithms to make standard val

e interest, depreciation & tax that have been recorded before finali

and make tax payment. However, we converted it into the natural

ve the heteroskedasticity.

re interest & tax that has been recorded before finalizing interest

e converted it into the natural logarithms to remove the heteroske

called as return on investment (ROI). The strategic aim of a bu

We converted it into the natural logarithms to remove the heteros

es the net profit in terms of equity shareholders funds. This ratio

equity shareholders since it indicates the return on the finished e

tax / net worth * 100

res long term debt to the new worth of the firm i.e. the capital an

would be of more interest to the contributories of long term finan

the natural logarithms to make standardized value and to remove th

ial return on listing days of IPOs than we correct these return wit

e the market moments and to avoid any market co incidence. We

ke standard value and to remove the heteroskedasticity.

www.iiste.org

the company, the long term

. Afterwards we converted it

asticity.

ebts and make tax payment.

value and to remove the

pay for goods and services

g the liquidity & solvency of

f a company.

rs, is reasonable and whether

the natural logarithms.

ed assets represent the gross

long run efficiency.

funds that are available for

debt and low ratio indicates

materials, work in progress

erest on debts and make tax

ue.

zing interest on debts, depre-

logarithms to make standard

on debts and make tax pay-

asticity.

siness enterprise is to earn a

edasticity. Net profit/ capital

is an important yardstick of

mployed by them. Net profit

free reserves less intangible

e to the firm. Afterwards we

e heteroskedasticity.

h market index performance.

converted it into the natural


10/19


Vol 4, No.14, 2012

Magnitude of IPOs

Table no 2. It contains magnitude o

divided on the basis of IPO that lis

and overpricing in different years. I

fixed price option. ata is collecte

nism (BB), fixed price option (FPO)

price option underpricing (FPOU),

Year BS

E

Iss

ue

B

B

FP

O

BB-Un

er

2000 67 11 56 6

2001 10 2 8 0

2002 5 1 4 0

2003 11 4 7 3

2004 25 17 8 9

2005 67 48 19 26

2006 89 68 21 36

2007 10

5

91 14 58

2008 38 33 5 16

2009 21 21 0 14

2010 73 71 2 472011 39 38 1 19

Total 55

0

40

5

145 234

ntnline)

10

IPOs after Indian stock market crisis since October

ed via book build and fixed price option. It is also sh

t segregates issue that is priced through book build a

with BSE websites and Capitaline database. Howe

, Book building underpricing (BBU), Book building o

nd fixed price option overpricing (FPOO).

BB-Ov

er

FPO-Und

er

FPO-ov

er

%

BBU

%B

O

5 30 26 21.96 -46.

2 2 6 0.00 -62.

1 4 0 0.00 -50.

1 5 2 90.16 -87.

8 6 2 54.43 -45.

21 14 5 31.47 -51.

32 14 7 36.75 -46.

32 7 7 51.54 -21.

17 2 3 36.45 -26.

7 0 0 19.09 -14.

24 2 0 22.35 -12.19 0 1 47.36 -33.

169 86 59 34.29 -41.

www.iiste.org

2000 to dec 2011. It is

ows % of underpricing

d that is price through

ver Book build mecha-

verpricing (BBO), fixed

B

%FPO

U

%FPO

O

7 191.32 -32.3

0 47.50 -52.0

3 16.07 0.0

1 97.86 -85.3

5 74.10 -56.0

5 60.37 -63.8

3 38.91 -25.0

2 113.67 -3.3

6 18.06 -32.3

2 0.00 0.0

5 60.77 0.02 0.00 -70.4

6 59.88 -35


11/19


Vol 4, No.14, 2012

Descriptive statistics results

Varia-

bles

Me

an

Me

dian

Maxi

mum

LOG

DEBEQ

-0.

07

0.01 4.28 -

LOG

APATM

2.2

2

2.19 6.94 -1

LOG

CPM

2.4

9

2.42 6.94 -

LOG

CURRN

TR

0.6

8

0.43 3.94 -1

LOG

DEBTO

RS

2.0

5

1.74 10.37 -

LOGFIXDA

ST

1.12

1.24 4.29 -

LOG

INTCV

R

1.9

0

1.49 6.78 0

LOG

INVNT

RY

2.2

3

2.32 7.61 -

LOG

MAAR

O

2.6

3

3.00 4.96 -

LOGPBDTM

2.74

2.79 7.05 -

LOG

PBIDT

M

3.0

8

2.97 7.17 -

LOG

PBITM

2.8

8

2.86 7.17 -

LOG

ROCE

2.8

4

2.95 5.23 -1

LOG

RONW

2.9

3

3.22 5.11 -

LOGTERM

DEBTE

-0.32

-0.24

3.58 -

Table no 3; descriptive resu

ntnline)

11

ini

um

Std.

Dev.

Skew

ness

Kurt

osis

Jarque

-Bera

Proba

bility

.61 1.46 -0.32 4.80 12.43 0.00 -

7

1.20 1.35 0.09 3.85 2.60 0.27 1

.

.27 1.22 0.22 4.11 4.91 0.09 2

.

1.27 0.81 1.11 5.53 38.61 0.00 5

5

.31 1.63 2.42 11.3

2

316.29 0.00 1

.

.21 1.45 -0.19 3.07 0.50 0.78 98

.00 1.66 1.32 4.10 28.04 0.00 1

.

.60 1.57 0.41 3.58 3.45 0.18 1

.

.49 1.40 -0.47 2.35 4.43 0.11 2

.

.17 1.26 -0.16 4.02 3.91 0.14 2.

.13 1.13 -0.11 5.03 14.21 0.00 2

.

.87 1.27 -0.31 4.59 9.89 0.01 2

.

1.14 1.17 -1.25 4.68 30.94 0.00 2

.

.30 1.10 -1.19 4.39 26.03 0.00 2

.

.61 1.32 -0.24 5.16 16.65 0.00 -1

lts of variables

www.iiste.org

u

m

Sum

Sq.De

v

Ob-

servati

on

.9

172.25 82

81

9

147.08 82

03

9

119.81 82

5.

6

52.99 82

68

0

215.40 82

1.7

170.56 82

55

5

224.12 82

82

5

199.22 82

15

2

158.10 82

243

128.95 82

52

9

103.35 82

36

2

130.08 82

32

1

110.32 82

40

6

98.81 82

6.0

140.24 82


12/19


Vol 4, No.14, 2012

Kwiatkowski-Phillips-Schmidt-Sh

Null Hypothesis: LOGMAARO is s

Kwiatkowski-Phillips-Schmidt-Shin

Asymptotic critical v

*Kwiatkowski-Phillips-Schmidt-Shi

Residual variance (no correction)

HAC corrected variance (Bartlett ke

S.E. of regression

Sum squared resid

Durbin-Watson stat

Table 4Kw

ntnline)

12

in test statistic

ationary

test statistic

alues*: 1% level

5% level10% level

n (1992, Table 1)

rnel)

1.298001 Akaike info criterion

497.0176 Schwarz criterion

1.761576 Hannan-Quinn criter.

iatkowski-Phillips-Schmidt-Shin test statistic result

www.iiste.org

LM-Stat.

0.43563

0.73900

0.463000.34700

1.67911

2.46398

3.36290

3.37536

3.36789


13/19


Vol 4, No.14, 2012

Table no 5. Vector Auto regression

pricing (LOG Under & LOG Maaro

subscription level, pricing mechani

we compare level of underpricing

adjusted return (Maaro) and tried ttionship among variables by using t

Included observations: 79 after a

Standard errors in ( ) & t-statistics in [ ]

Variables D(LOGMAARO)

CointEq1

0.354942

(0.37798)

[ 0.93906]

D(LOGMAARO(-1

-0.772243

(0.36494)

[-2.11611]

D(LOGMAARO(-2))

-0.202505

(0.29371)

[-0.68947]

D(LOGUNDER(-1))

0.235222

(0.45764)

[ 0.51399]

D(LOGUNDER(-2))

0.004081

(0.32926)

[ 0.01239]

C

0.892944

(0.92384)

[ 0.96656]

LOG_DEBEQ

0.406014

(0.24486)

[ 1.95812]

LOGAPATM

1.143779

(0.63709)

[ 1.99532]

LOGCPM

-0.973829

(1.45314)

[-0.67015]

LOGCURRNTR

-0.318729

(0.27800)

[-1.14653]

LOG MAARO

R-squared 0.466639

Adj. R-squared 0.294878

Sum sq. resids 138.8104

S.E. equation 1.533858

F-statistic 2.716798

Log likelihood -134.3608

Akaike AIC 3.907868

Schwarz SC 4.507728

Mean dependent 0.018713

S.D. dependent 1.826640

ntnline)

13

model expresses association among the dependent

) with independent variables i.e. firms age, issue siz

m and ownership structure @ 5% & 10% significan

ith two methods. First is traditional underpricing met

find any association of market moments. Resultsstatistics and p-value.

justments

D(LOGUNDER Variables D(LOGMA

0.976004

(0.34811)

[ 2.80373]

LOGDEBTORS

-0.0717

(0.1171

[-0.612

-0.563798

(0.33610)

[-1.67747]

LOGFIXDAST

-0.0347

(0.172

[-0.201

-0.081807

(0.27050)

[-0.30242]

LOGINTCVR

0.1385

(0.148

[ 0.933

0.239315

(0.42148)

[ 0.56779]

LOGINVNTRY

-0.0420

(0.120

[-0.348

-0.031882

(0.30324)

[-0.10514]

LOGPBDTM

-0.5467

(1.498

[-0.364

0.490037

(0.85084)

[ 0.57594]

LOGPBIDTM

0.5418

(0.643

[ 0.842

0.379931

(0.22552)

[ 1.68472]

LOGPBITM

-0.0092

(0.797

[-0.011

0.771619

(0.58675)

[ 1.31507]

LOGROCE

1.3609

(0.491

[ 2.768

-0.018673

(1.33832)

[-0.01395]

LOGRONW

-1.6153

(0.497

[-3.245

-0.119307

(0.25603)

[-0.46599]

LOGTERMDEBTE

-0.0089

(0.242

[-0.036

LOGUNDER

0.488971Determinant resid covariance (dof

adj.)0.324403

117.7405

1.412657Determinant resid covariance

2.971229

-127.8580Log likelihood

3.743241

4.343101Akaike information criterion

-0.007724

1.718671 Schwarz criterion

www.iiste.org

ariable level of under-

, market capitalization,

ce level. In this model

od & second is market

how a significant rela-

RO D(LOGUNDER)

67

11)

81]

-0.035667

(0.10786)

[-0.33069]

29

0)

4]

0.054115

(0.15878)

[ 0.34081]

55

0)

4]

0.088136

(0.13668)

[ 0.64485]

58

5)

88]

-0.003245

(0.11103)

[-0.02923]

12

9)

2]

-1.163609

(1.38055)

[-0.84286]

79

2)

18]

0.608214

(0.59258)

[ 1.02638]

05

3)

55]

0.023359

(0.73405)

[ 0.03182]

50

4)

17]

0.970093

(0.45279)

[ 2.14246]

33

2)

8]

-1.285052

(0.45839)

[-2.80340]

36

0)

82]

-0.171438

(0.22353)

[-0.76697]

0.694054

0.387118

-186.7057

5.790018

7.049725


14/19


Vol 4, No.14, 2012

S.No. Variables

1 LOG_DEBEQ

2 LOGAPATM

3 LOGCPM

4 LOGCURRNTR

5 LOGRONW

6 LOGTERMDEBTE

7 LOGDEBTORS

8 LOGFIXDAST

9 LOGINTCVR

10

LOGINVNTRY11 LOGPBDTM

12 LOGPBIDTM

13 LOGROCE

14 LOGPBITM

Tab

S.No. Variables

1 LOG_DEBEQ2 LOGAPATM

3 LOGCPM

4 LOGCURRNTR

5 LOGRONW

6 LOGTERMDEBTE

7 LOGDEBTORS

8 LOGFIXDAST

9 LOGINTCVR

10 LOGINVNTRY11 LOGPBDTM

12 LOGPBIDTM

13 LOGROCE

14 LOGPBITM

Tab

ntnline)

14

t-Statistic

t- value @ 5% t

=(1.64)

Null hy-

pothesis

H0

2.05812 1.64 Rejected

1.99532 1.64 Rejected

-0.67015 -1.64 Accepted

-1.14653 -1.64 Accepted

-3.24548 -1.64 Rejected

-0.03682 -1.64 Accepted

-0.61281 -1.64 Accepted

-0.20144 -1.64 Accepted

0.93364 1.64 Accepted

-0.34888

-1.64 Accepted

-0.36472 -1.64 Accepted

0.84218 1.64 Accepted

2.76817 1.64 Rejected

-0.01155 -1.64 Accepted

le no 6 null hypothesis results by Log Maaro

t-Statistic

t- value @ 5% t =

(1.64)

Null hy-

pothesis

H0

1.68472 1.64 Accepted1.31507 1.64 Accepted

-0.01395 -1.64 Accepted

-0.46599 -1.64 Accepted

-2.80340 -1.64 Rejected

-0.76697 -1.64 Accepted

-0.33069 -1.64 Accepted

0.34081 -1.64 Accepted

0.64485 1.64 Accepted

-0.02923 -1.64 Accepted

-0.84286 -1.64 Accepted

1.02638 1.64 Accepted

2.76817 1.64 Rejected

0.03182 1.64 Accepted

le no 7 Null hypothesis results by Log under

www.iiste.org

Relationship

With

Dependent var

Positive

Positive

No relation

No relation

Negative

No relation

No relation

No relation

No relation

No relation

No relation

No relation

Positive

No relation

Relationship

With

Dependent var

No relationNo relation

No relation

No relation

Negative

No relation

No relation

No relation

No relation

No relationNo relation

No relation

Positive

No relation


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Vol 4, No.14, 2012

Appendix- List of figures

Figure no 1 indicating the listed of

axis we have taken years and on x a

been underpriced out of total IPOs

Fig

Figure 2 Number of I

0

50

100

150

2000 2001 2002 2003

noo

fipos

Num

ntnline)

15

the initial public offers at Bombay stock exchange

is number of IPOs have been listed. It indicates the n

as listed at BSE.

ure 1 Number of IPOs and underpricing

POs was listed at Bombay stock exchange from (1

2004 2005 2006 2007 2008 2009 2010Year

ber of IPOs and Underpriced

www.iiste.org

ince April 2000. On y

umber of IPOs that has

95-2011)

2011

Year

No of ipos

Underprcd


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Vol 4, No.14, 2012

Figure 3

Figure 4 Total amount wer

ntnline)

16

Total amount raised by IPOs in Indian market

e raised by IPOs at the Bombay stock exchange fr

www.iiste.org

m (1995-2011)


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Vol 4, No.14, 2012

Figure 5 Details for IPOs unde

Figure 6 Graphical rep

ntnline)

17

priced and their pricing mechanism (book build

esentation of Standard deviation for all independe

www.iiste.org

fixed price option)

nt variables


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Vol 4, No.14, 2012

Figure 7Normality test o

Figure 8: Result of

ntnline)

18

fdependent variable i.e. log underpricing by Jarque

statistics for Ex-ante variables are used in regressio

www.iiste.org

Bera testing

model


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Vol 4, No.14, 2012

igure 9: Result of t statis

ntnline)

ics (Line graph) for Ex-ante variables are used in reg

www.iiste.org

ression model

effect of market crisis of financial efficiency on underpricing_ an var overview of indian ipos

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