IPO's Underpricing: Trends, Determinants and Role of Underwriters

摘要

In this study, we examine the trends of the initial public offering (IPO) market, a relationship between the composition of underwriters and size of firms and determinants of underpricing in small, medium and large firms. The sample data period is from November 2003 to March 2018. We have found that large firms have been deploying book-running lead managers (BRLMs) twice as much as in medium and small firms. Similarly, the total number of underwriters in IPOs of large firms are found to be more than small and medium size IPOs. However, uses of syndicate services do not seem to have much difference among all categories of the firms. The IPOs are growing in terms of number of IPOs, size of IPOs (fund raised) and the average size of IPOs. Offer subscription has been found to be a common determinant to explain underpricing across the categories. It can be concluded that advertisement seems to reduce information asymmetry in a large market but does the opposite in a medium-sized market. Age of public firms can reduce the information asymmetry, but statistical shreds of evidence have been found only in case of large-sized firms. For medium-sized firms, BRLMs can help to reduce information asymmetry and consequently have low underpriced IPO offer.