Review of Professional Management- A Journal of New Delhi Institute of Management

Open Access Open Access  Restricted Access Subscription Access

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


Affiliations
1 Apeejay School of Management, New Delhi, India
 

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.


Keywords

IPOs, Ownership Retention, Market-Adjusted Return, Initial Return.
User
Notifications
Font Size

  • . Allen, R, & Faulhaber, G. R. (1989). Signaling by Underpricing in the IPO Market. Journal of Financial Economics, 23(1). 303-323.

  • Baron , D. P., & Holmstrom, B. (1980). The Investment Banking Contract for New Issues Under Asymmetric Information: Delegation and the Incentive Problem. The Journal o f Finance, 35(5). 1115-1138.

  • Benveniste, L. M., 8i Spindt, P. A. (1989). How Investment Bankers Determine the Offer Price and Allocation of New Issues. Journal of Financial Economics, 24(2). 343-361.

  • Brennan, M.J., & Franks, J.(1997). Underpricing, Ownership and Control in Initial Public Offerings of Equity Securities in The UK. Journal o f Financial Economics, 45(3). 391-413.

  • Courteau, L. (1995). Under-Diversification and Retention Commitments in IPOs. The Journal o f Financial and Quantitative Analysis, 30(4). 487 -517.

  • Espenlaub, S., 8i Tonks, I. (1998). Post-IPO Directors' Sales and Reissuing Activity: An Empirical Test of IPO Signalling Models. Journal o f Business Finance & Accounting, 25(9-10). 1037-1079.

  • Krinsky, L, 8i Rotenberg, W. (1989). Signaling and the Valuation of Unseasoned New Issues Revisited. The Journal o f Financial and Quantitative Analysis, 24(2). 257-266.

  • Leland, H., 8i Pyle, D. (1977). Informational Asymmetries, Financial Structure, and Financial Intermediation. Journal o f Finance, 32(2). 371-387.

  • Li, M., Zheng, S. X., & Melancon, M. V. (2005). Underpricing, share retention, and the IPO aftermarket liquidity. International Journal of Managerial Finance, 1(2). 76-94.

  • Ljungqvist, A., 8i Wilhelm, W. (2003). IPO pricing in the dot-com bubbleiComplacency or incentives? Journal o f Finance, 58. 723-752.

  • Ljungqvist, A., Nanda, V., 8i Singh, R. (2006). Hot Markets, Investor Sentiment, and IPO Pricing. Journal o f Business, 79(4). 1667-1702.

  • Mayur, M., 8i Kumar, M. (2009). Ownership and Performance in an Emerging Market: Evidence from Indian IPO Firms. The ICFAI Journal of Applied Finance, 15(7). 5-23.

  • Miller, R. E., & Reilly, F. K. (1987). An Examination of Mispricing, Returns, and Uncertainty for Initial Public Offerings. Financial Management, 16(2). 33-38.

  • Ozcelik, Z. (2014). The Impact of Ownership Retention on IPO Firm Value. British Journal of Economics, Finance and Management Sciences, 9(1). 133-148

  • Ramfrez, M. A. A., Cabestre, F.J. R., 8i Aquilue, R. S. (2011). Influence of IPO characteristics on Liquidity, Spanish Journal of Finance and Accounting. 40 ( 151). 417-437

  • Rock, K. (1986). Why New Issues are Underpriced. Journal o f Financial Economics, 15(1-2). 187-212.

  • Sahoo, S., 8i Rajib, P. (2010). After Market Pricing Performance of Initial Public Offerings (IPOs): Indian IPO Market 2002-2006. Vikalpa, 35(4). 27-43.

  • Welch, I. (1992). Sequential Sales, Learning, and Cascade. The Journal o f Finance, 47(2). 695-732.

  • Zheng, S., Ogden, J., & Jen, F. (2005). Pursuing Value through Liquidity in IPOs: Underpricing, Share Retention, Lockup and Trading Volume Relationships. Review of Quantitative Finance and Accounting, 25(3). 293-312.


Abstract Views: 540

PDF Views: 207




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

Abstract Views: 540  |  PDF Views: 207

Authors

Divya Jindal
Apeejay School of Management, New Delhi, India

Abstract


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.


Keywords


IPOs, Ownership Retention, Market-Adjusted Return, Initial Return.

References





DOI: https://doi.org/10.20968/rpm%2F2017%2Fv15%2Fi1%2F151686