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Underpricing and Aftermarket Performance of IPO Firms in Mauritius

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  • Dominic Gasbarro
  • Sunil Bundoo
  • J. Kenton Zumwalt

Abstract

Initial public offering (IPO) financial strength measures are created to examine both the initial underpricing and aftermarket performance of firms in an emerging market. We find that the initial underpricing is positively related to financial strength as proxied by cash flow and sales. Since bond ratings do not exist in Mauritius, a return-to-risk meas ure and Altman's z-score serve as proxies for financial strength. Using these measures, the aftermarket performance results indicate that net income is more higbly valued for strong firms. When net income is separated into dividends and earnings retained, we find dividends are valued more highly than earnings retained for firms in Mauritius.

Suggested Citation

  • Dominic Gasbarro & Sunil Bundoo & J. Kenton Zumwalt, 2003. "Underpricing and Aftermarket Performance of IPO Firms in Mauritius," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 2(3), pages 315-335, September.
    • Handle: RePEc:sae:emffin:v:2:y:2003:i:3:p:315-335
    DOI: 10.1177/097265270300200303
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    References listed on IDEAS

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