Objectives: The study examines the role of uncertainty in explaining underpricing (i.e., over performance) of IPOs immediately after listing in the context of the Indian IPO market over the study period 2000-01 to 2015-16.
Methods: We have collected data through different sources, like, Prime Database, CMIE Prowess, the official websites of BSE and NSE. For the purpose of evaluating the objectives of the study, ordinary least square (OLS) method is used to estimate parameters.
Findings: The study shows that there is a monotonic relationship between uncertainty among investors regarding the firm value and underpricing of IPOs. We see that the small issues being speculative are associated with higher uncertainty. Further, it is also observed that the degree of uncertainty is higher in the period of economic meltdown compared to the normal period.
Applications: From the estimated results of the study, it is apparent that underpricing of IPOs is persistent in India immediately after listing. Further, it is also appeared that uncertainty is deep-ischolar_mained with information asymmetry. Higher the degree of information asymmetry among the investors higher will be the underpricing of IPOs.