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Group affiliation and the performance of IPOs in the Indian stock market

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  • Marisetty, Vijaya B.
  • Subrahmanyam, Marti G.
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    Abstract

    We document the effects of group affiliation on the initial performance of 2,713 initial public offerings (IPOs) in India under three regulatory regimes during the period 1990-2004. We distinguish between two competing hypotheses regarding group affiliation: the "certification" and the "tunneling" hypotheses. We lend support to the latter by showing that the underpricing of business group companies is higher than that of stand-alone companies. Furthermore, we find that the long-run performance of IPOs, in general, is negative. We also find that Indian investors over-react to IPOs and their over-reaction (proxied by the oversubscription rate) explains the extent of underpricing.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Financial Markets.

    Volume (Year): 13 (2010)
    Issue (Month): 1 (February)
    Pages: 196-223

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    Handle: RePEc:eee:finmar:v:13:y:2010:i:1:p:196-223

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    Web page: http://www.elsevier.com/locate/finmar

    Related research

    Keywords: Initial public offering (IPO) Underpricing Business groups Certification Tunneling;

    References

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