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When-issued trading in the Indian IPO market

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  • Brooks, Raymond M.
  • Mathew, Prem G.
  • Yang, J. Jimmy

Abstract

We examine the contribution of when-issued trading to price discovery and underpricing in the Indian IPO market. Besides the when-issued trading, there exists IPO grading, analyst recommendation, group affiliation, and the subscription rates in the bookbuilding process. We examine the impact of these activities and find three sequential factors that explain the IPO underpricing. Higher grades for an IPO lead to higher when-issued premiums, which in turn leads to higher subscription rates. Then, higher subscription rates lead to higher IPO underpricing. Overall, we find that the when-issued trading plays an important role in price discovery in the Indian IPO market.

Suggested Citation

  • Brooks, Raymond M. & Mathew, Prem G. & Yang, J. Jimmy, 2014. "When-issued trading in the Indian IPO market," Journal of Financial Markets, Elsevier, vol. 19(C), pages 170-196.
    • Handle: RePEc:eee:finmar:v:19:y:2014:i:c:p:170-196
    DOI: 10.1016/j.finmar.2013.10.001
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    Cited by:

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    4. Petkevich, Alex & Samdani, Taufique, 2022. "The equilibrium prices of auction IPO securities: Empirical evidence," Journal of Financial Markets, Elsevier, vol. 57(C).

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    More about this item

    Keywords

    When-issued trading; Initial public offering; Indian equity markets; IPO underpricing; Information asymmetry;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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