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The underpricing of IPOs on the Stock Exchange of Mauritius

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  • Agathee, Ushad Subadar
  • Sannassee, Raja Vinesh
  • Brooks, Chris

Abstract

This paper investigates the underpricing of IPOs on the Stock Exchange of Mauritius (SEM). Taking into account the whole population of firms which went public since the inception of the SEM until 2010, the results show an average degree of underpricing within the range 10–20%. Using a regression approach, we demonstrate that the aftermarket risk level and auditor's reputation both have a significant positive impact on initial returns. We propose the use of the Z-score as a composite measure of a firm's ex ante financial strength, and find that it has a significant negative effect on the degree of short-run underpricing.

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Bibliographic Info

Article provided by Elsevier in its journal Research in International Business and Finance.

Volume (Year): 26 (2012)
Issue (Month): 2 ()
Pages: 281-303

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Handle: RePEc:eee:riibaf:v:26:y:2012:i:2:p:281-303

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

Related research

Keywords: Initial public offerings; Underpricing; Ex ante uncertainty hypothesis; Underwriter reputation hypothesis; Stock Exchange of Mauritius;

References

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Cited by:
  1. Hahl, Teemu & Vähämaa, Sami & Äijö, Janne, 2014. "Value versus growth in IPOs: New evidence from Finland," Research in International Business and Finance, Elsevier, vol. 31(C), pages 17-31.

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