Effect of Ownership Retention on Initial Returns of IPOS Listed on NSE

IPOs are the focus of attention for many investors, analysts and researchers as they have the potential to provide huge abnormal returns on the first day of listing. Various reasons have been assigned for the initial returns generated by IPOs. The ownership structure of the companies going public for both pre and post the listing of the IPO stocks, and more specifically ownership retention by promoters and promoter groups, may have an impact on liquidity of the stocks and hence the initial returns.

This paper empirically investigates the effect that the retention of ownership by promoters and promoter groups on the Market-Adjusted Initial Return (MAIR) from IPOs based on a sample of 95 IPOs issued in India and listed on National Stock Exchange (NSE) from 2010 to 2013. The findings show that the IPOs with higher ownership retention provide significantly higher MAIR.