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Economic Analysis of Initial Public Offering Underpricing in Stock Market of Pakistan

Author

Listed:
  • Gulzar Ali

    (Department of Economics, Islamia College University Peshawar, Khyber Pakhtunkhwa, Pakistan,)

  • Ansa Javed Khan

    (Women University Mardan, Khyber Pakhtunkhwa, Pakistan,)

  • Sara Rafiq

    (Department of Economics, Women University Mardan, Khyber Pakhtunkhwa, Pakistan.)

Abstract

The Initial Public Offering (IPO) underpricing in the stock market is considered an important factor to attract the investor towards the stock. In this study in addition to IPO the economic analysis of underpricing is investigated to examine economic effects of influencing factor of IPO underpricing in stock market of Pakistan for 98 listed companies taking their data for the period of 2013-2018. The findings of the regression analysis indicates that assets return, equities, earnings per share and profit margin are the important factors of IPO underpricing as there economic return to investor has significant, however, the effect of earning-price remains insignificant on IPO underpricing. The descriptive analysis of the study shows maturity of the selected variable and variance influencing factor indicates that the variables isn t multi-collinear with each other. The study concludes that impact of the liquidity level of IPO underpricing in the optional market would help the financial investors in strategizing their speculation through exchanging component.

Suggested Citation

  • Gulzar Ali & Ansa Javed Khan & Sara Rafiq, 2020. "Economic Analysis of Initial Public Offering Underpricing in Stock Market of Pakistan," International Journal of Economics and Financial Issues, International Journal of Economics and Financial Issues, vol. 10(4), pages 198-203.
    • Handle: RePEc:eco:journ1:2020-04-24
    as

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    References listed on IDEAS

    as
    1. Amihud, Yakov, 2002. "Illiquidity and stock returns: cross-section and time-series effects," Journal of Financial Markets, Elsevier, vol. 5(1), pages 31-56, January.
    2. Bell, R. Greg & Moore, Curt B. & Filatotchev, Igor, 2012. "Strategic and institutional effects on foreign IPO performance: Examining the impact of country of origin, corporate governance, and host country effects," Journal of Business Venturing, Elsevier, vol. 27(2), pages 197-216.
    3. Alok R. Saboo & Anindita Chakravarty & Rajdeep Grewal, 2016. "Organizational Debut on the Public Stage: Marketing Myopia and Initial Public Offerings," Marketing Science, INFORMS, vol. 35(4), pages 656-675, July.
    4. Boudriga, Abdelkader & Ben Slama, Sarra & Boulila, Neila, 2009. "What determines IPO underpricing ? Evidence from a frontier market," MPRA Paper 18069, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

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    Keywords

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    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • 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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