effect of market crisis of financial efficiency on underpricing_ an var overview of indian ipos
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7/31/2019 Effect of Market Crisis of Financial Efficiency on Underpricing_ an VAR Overview of Indian IPOs
1/19
European Journal of Business and ManagemISSN 2222-1905 (Paper) ISSN 2222-2839 (
Vol 4, No.14, 2012
Effect of Market Cri
an V
Rohit
Indian Institut
Phone: +
Indian Institut
Phone: +9
Abstract
This paper attempts to design for a
capabilities. Which are interactinglevel of underpricing after the Indi
stock exchange given that April-20
the relationship between all indepe
results of VAR display that variable
the level of Market adjusted return
theless, ROCE and RONW have a
cates 49% R2and 32% adjusted R2.
fied the assumptions of Akaike inf
verify stationary of time series and
cate, there is no heteroskedasticity p
Key words: IPOs, Post market cris
cific factors, market related variableJEL: G14, G32, G12
1. IntroductionThe underpricing of IPOs is anomal
In particular, one would expect the
investors will recognize the implied
of IPOs seems to be persistent in m
of existing owners to sell shares to
developed and developing markets
There are a number of theoreti
justifications for this observed phen
in the form of ex ante uncertainties
1989) and other similar studies, th
underpricing their listed IPOs. Mo
theories, investor sentiment theorie
ket.
The empirical evidence on t
(Megginson and Weiss, 1991), sugg
er hands, (Kay, 1986), documented,
IPO affects the value of the firm, a
1994), (Allen and Faulhaber, 1989
which intend to make subsequent
(Rock, 1986) and (An & Chan, 200
advisers are better informed about t
visers provide underwriting, marketas to reduce the selling effort and t
continuously exploring various face
(Rock, 1986), winner curse model,
ntnline)
1
sis of Financial Efficiency on
R Overview of Indian IPOs
ansal (corresponding author),Research scholar
e of Technology, Roorkee, Uttrakhand, India 24700
19927285001 Email: rohitbansaliitr@gmail.com
rohitdpt@iitr.ernet.in
Dr. Ashu Khanna, Asst Professor
e of Technology, Roorkee, Uttrakhand, India 24700
19756972391 Email: drashu.khanna@gmail.com
nd tests empirical models, which integrate theoretic
o explain financial efficiency, i.e. several financialn stock market crunch? The study is founded on IP
08 to Dec-2011. VAR (vector autoregressive analysi
ndent variables with the dependent variable, i.e. lev
of DEBTQ, APATM, ROCE and RONW have a cons
ratio (MARRO), AND VAR indicates 46% R2
and 3
significant difference in the level of traditional under
However, in the mutually of a case i.e. LOGMAAR
rmation criterion and Schwarz's criterion. We execu
autocorrelation function. Durbin Watsons value subs
roblem exist for the model?
is, ownership structure, share holding pattern, BSE,
s.
ous in the sense that it appears to contradict the effici
nderpricing of IPOs to disappear over time as the ov
profit opportunities and make good use of them. Ho
ost markets. Furthermore, it would be hard to ration
outsiders at discounted ices. The fact that these anom
akes them even more demanding to explain.
al explanations and models underpinning this IPO un
omenon rest upon the possible existence of informati
about share prices. Also, according to (Welch, 1989),
re exists a signaling mechanism where firms send si
eover, there are other possible explanations such as
and prospect theories to explain the degree of under
he performance of private and government firms
ested that privatized firms perform better than their c
which is supportive of government enterprise. The a
s well as the initial returns available to its subscribe
), explained underpricing as a signaling device use
quity issues to distinguish themselves from the othe
8), proposed non signaling explanations for underpri
e equilibrium price of an issue than the issuing com
ing, and price. Baron examines that they have an ince chance that they will left with unsold shares. Mos
s of the pricing mechanism to find suitable explanati
information revelation theory by (Benveniste & Spin
www.iiste.org
nderpricing:
1
1
l and firms economic
liquidity ratios at thethat listed at Bombay
) is used to distinguish
l of underpricing. The
equential association at
% adjusted R2. Never-
pricing, and VAR indi-
& LOGUNDER veri-
ted unit root testing to
isted 1.58. Which indi-
nderpricing, firm spe-
nt markets' hypothesis.
rwhelming majority of
ever, the underpricing
lly justify the behavior
alies exist in numerous
derpricing. The popular
n asymmetries, mainly
(Benveniste & Spindt,
ignals to the market by
underwriter reputation
ricing in the IPO mar-
is also inconclusive.
unterparts. On the oth-
curacy of pricing of an
rs. (Loughran & Ritter,
by high-quality firms
r firms. (Baron, 1982),
cing. In barons model,
any and investors. Ad-
entive to underprice sot of the researchers are
ns for the underpricing.
dt, 1989), price stabili-
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European Journal of Business and ManagemISSN 2222-1905 (Paper) ISSN 2222-2839 (
Vol 4, No.14, 2012
zation theory byRudd (1993), tried
the winners cursemodel based on
entice uninformed investors, compa
The remainder of the paper pr
derpricing, and section 3 elaborates
ses. Section 5 introduces our datadependent variable and all indepen
association between the IPO underp
1.1 Role of BSE in book buildinBSE suggests the book building se
work. This system is one of the lar
cities through over 7000 trader wor
ated through book-runners of the is
member brokers on behalf of them
syndicate members, and the informa
transparency, the software gives vis
1.2. Why IPO Underpricing
An initial public offering (IPO) iss
single investment bank or group of
(institutional & non-institutional) in
per share (issue price) while the inv
intermediaries help in matching the
ious other functions like certifying t
Exchange Board of India (SEBI), d
responsibilities.
1.3. Theories and models of underThus, according to the winners cu
between informed and uninformed
pricing for IPOs of financial instituFaulhaber, 1989) asymmetric infor
firm, liquidity ratios, financial effici
firms, firm performance (McDonal
and Khanna, 2012) determinants of
(Leite, 2007), generalized the i
and conjectures that the standard m
showed that high (low) market retur
create a negative relation between t
tive relation between market returns
(Dolvin and Jordon, 2008), ad
affect pre-existing shareholders. Th
retention, which effectively offsetsis stable over time, unlike underpric
nificant determinants of the cost of
(Kumar, 2010), examines the
tapped the primary market during
i.e., including both direct as well a
neither better nor worse using eith
issue expenses associated with boo
ling for issue size and firm specific
(Bansal and Khanna, 2012), a
level of underpricing of IPOs that
option. They found that the magnit
different results. They found signi
through book build with those that a
2. Research objectives1) To measures, the IPOs ini
ntnline)
2
to give reasons for the Underpricing phenomenon. (
the information asymmetry between informed and u
ies underpriced new issues so that after market price
ceeds as follows. Section 2 discusses the theories an
the empirical evidence regarding literature. Section
nd sample. Section 6 analyzes VAR regarding IPOent variables. Section 7 addresses the results. And
ricing and independent variables. Section 9 concludes
g process
vices through the book building software that runs
gest electronic book building networks anywhere sp
k stations via leased lines, VSATs and campus LAN
sue and by the syndicate member brokers. Through t
selves or their clients' place orders. Bids are placed
tion is collected on line real-time until the bid date en
al graphs displaying price v/s quantity on the termina
e process requires the active involvement of three
investment banks (for underwriting & marketing the
tending to buy shares. The issuing firm wants to obt
stors want to buy the shares at a minimum price. Inv
opposite expectation of both the parties. Investment
he economic rationale of the issue to regulatory bodi
ciding the issue price, allocating shares to investors
ricing
rse theory, IPO underpricing should decrease if the i
investors is reduced. Empirical studies have found e
tions is related to proxies for asymmetric informatioation(Ibbotson, 1975) Offer size (Megginson and
iency (Muscarella and Vetsuypens, 1989) market capi
and Fisher, 1972), (Baker and Wurgler, 2007), Pric
PO underpricing.
nformational assumptions of the (Rock, 1986) to add
del based on informed and uninformed investors is
ns induces the issuer to price the issue more conserva
he public signal and the quality of the marginal inve
and underpricing.
ressed the question of whether or not periods of high
y found that high levels of underpricing are associat
uch of the potential cost. Overall, the percentage ofing itself. Also many factors known to be related to u
oing public to pre-existing owners.
efficiency of IPO issuing mechanisms using a sam
003-07 by taking in to consideration the total costs t
indirect costs. He finds that from a total cost point
r book building or the fixed price offers. Their resul
building is more than those associated with fixed pr
haracteristics.
alyzes that whatever there is any significant differen
riced through book build with those that are priced
de of underpricing is concerned; the book-build and
icant difference in level of magnitude of underprici
re priced through the fixed price option.
ial performance on first trading day at Bombay stoc
www.iiste.org
ock, 1986), developed
informed investors. To
exceeds the offer price.
models about IPO un-
develops the hypothe-
underpricing includingection 8 considers the
the paper.
n the BSE private net-
nning over 350 Indian
. The software is oper-
his book, the syndicate
electronically through
ds. In order to maintain
ls.
ey players: the firm, a
IPO), and the investors
ain the maximum price
estment banks acting as
anks also perform var-
es like the Securities &
and other issue specific
information asymmetry
idence that the under-
. Signaling(Allen andeiss, 1991) age of the
talization, credibility of
ing mechanism (Bansal
ress empirical evidence
nable to address. They
tively (aggressively) to
tor, and in turn a posi-
underpricing adversely
ed with increased share
shareholder wealth lostnderpricing are not sig-
le of Indian IPOs that
he issuers have to face
f view the issuers fare
ts also showed that the
ice offers after control-
ce in the magnitude of
through the fixed price
fixed price option gave
ng in IPOs that priced
exchange from (April
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European Journal of Business and ManagemISSN 2222-1905 (Paper) ISSN 2222-2839 (
Vol 4, No.14, 2012
2008 to Dec-2011).
2) To analysis, the diverse fscription pattern) that affe
crisis. And to distinguish t
3. Research MethodologyThe data is analyzed using multiplethe underpricing. Empirical studies
related to proxies for asymmetric i
Weiss, 1991), age of the firm(Musc
ty ratios, firms profitability, (McDo
with IPO underpricing, Offer timin
(Singh & Mittal, 2003).
1.2 Measures for VariablesThe variables used in the study hav
1.2.1 Measure of underpricingConsistent with the standard metho
price to the closing price in the seco
Traditional underpricing = ((closi
Log underpricing = ln (P1-P0/P0)
Log Underpricing = ln (closing pri
standard practice and to avoid h
(MAARO).
Firstly, we have calculated the retur
i security, P1= Price of, i security on
Equation 1Ri= (P1-P0)/P0
Secondly, we have also calculated i
which, Mi= market return on ith da
Equation 2 Mi= (Ii- I0)/ I0
Finally, we have calculated market
Mi from equation (2).Equation 3 MAARO = {100* [(1+
Underpricing is used as dependent v
1.3 Hypothesis ModelOn the basis of empirical studies
variables. We have constructed vari
iables. Two tailed hypothesis test h
the 5% significance level.
Null hypothesis: H0: There is no si
ble i.e. level of underpricing.
1.3.1.1 Debt-Equity Ratio (D/EDebt- equity ratio indicates the relfinancial stability of the firm. We h
into the natural logarithms to make
D/E Ratio = Long- term Debt / S
H1: There is positive significant ass
1.3.2 Current Ratio (CR)Current ratio is calculated current a
the firm in the short term. We have t
CR= Current assets, Loans & adv
H2: There is negative significant di
1.3.3 Creditors payment period (The measurement of the creditor t
purchased by the company. In gene
mean that the operations of the com
CPP = Average creditor/ credit pu
ntnline)
3
ctors (firms age, number of shares offered, market
ting the dependent variable i.e. degree of underpricin
he association between several financial ratios and lev
linear regressions. To find out which variables are si
ave found evidence that the underpricing for IPOs o
nformation. Liquidity positions, firm efficiency, Off
arella and Vetsuypens, 1989), (Barry & brown, 1985
nald and Fisher, 1972),(Bansal and Khanna, 2012),
from price setting to listing date found negatively re
been measured as described below.
dology, underpricing is calculated as the percentage
ndary market.
g price - offer price) /offer price) * 100
100
ce/ offer price) is used to determine the level of un
eteroskedasticity. We have got marketed adjusted
on, i security, where we have used Ri= (P1-P0)/P0 i
first listing day, P0= offer price of, i security.
index return on corresponding days, where we have
, Ii = closing index at listing day, I0= closing index at
..
adjusted return on security, where we have taken Ri
i)/ 1+Mi)1]}
ariable in this multiple regression model.
Insert Table 1 Description of variables
hich have found evidence that the underpricing for
us hypothesis related to our research problems, rese
s been used to find the significant association betw
nificant difference between independent variables wi
Ratio)tionship between loan funds and new worth of the
ve taken previous Year before issuing IPO year. Aft
tandardized value and to remove the heteroskedastici
hareholders Funds
ociation between Debt- equity ratios with the level of
sets divided by current liabilities. It is indicating the
aken current ratio to reveal liquidity condition of a co
ances / Current Liabilities & Provisions
ference between Current Ratio and the level of under
CPP)
rnover period shows the average time taken to payal the longer the credit period achieved the better, be
any are being financed interest free by suppliers of m
rchase * 365 (in days)
www.iiste.org
capitalization, and sub-
g after the stock market
el of underpricing.
nificant in determining
financial institutions is
r size (Megginson and
, Company size, activi-
ave all been associated
lated with underpricing
change from the offer
.. (1)
. (2)
erpricing and to make
returns on securities
n which, Ri= return on,
(3)
sed Mi= (Ii- I0)/ I0 in
offer day.
(4)
from equation (1) and
.(5)
IPOs with independent
rch objectives and var-
en various variables at
th the dependent varia-
ompany, the long term
rwards we converted it
y.
underpricing.
liquidity & solvency of
mpany.
ricing.
for goods and servicescause delay in payment
aterials.
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European Journal of Business and ManagemISSN 2222-1905 (Paper) ISSN 2222-2839 (
Vol 4, No.14, 2012
H3: There is negative significant di
1.3.4 Debtors turnover ratioDebtors turnover, which measures
er the company has been efficient in
position. We converted it into the na
DV = Credit sales/ Average DebtoH4: There is positive significant lin
1.3.5 Fixed Assets to long termThis ratio indicates the proportion
assets minus depreciation. Neverthe
FALTF = Fixed Assets / Long- ter
H5: There is positive significant dif
pricing.
1.3.6 Interest coverage ratioThe interest coverage ratio shows h
payment of interest. A very high rat
excessive use of debt.
ICR = Profit before Interest, Dep
H6: There is negative significant di
1.3.7 Inventory turnover ratioA considerable amount of a compan
and finished goods. We converted it
ITR = Cost of Goods sold or sales
H7: There is positive significant dif
1.3.8 Profit before DepreciationTotal profit before depreciation &
payment. However, we converted it
H8: There is positive significant ass
derpricing.
1.3.9 Profit before interest depreTotal profit before interest, deprecia
on equity. However, we converted
heteroskedasticity.
H9: There is positive significant ass
of underpricing.
1.3.10 Profit before interest and tTotal profit before interest & tax tha
However, we converted it into the n
H10: There is negative significant
pricing.
1.3.11 Return on capital employThis ratio is also called as return on i
on capital. We converted it into the
ployed.
ROCE = Net profit / Capital empl
ROCE = Net profit / sales * sales /
H11: There is positive significant di
1.3.12 Return on net worthThe ratio expresses the net profit i
performance for equity shareholder
RONW = Net profit after interest an
H12: There is negative significant di
1.3.13 Profit after interest and taxTotal profit after interest & tax that
ntnline)
4
ference between Creditors payment period and the lev
hether the amount of resources tied up in debtors, is
converting debtors into cash. The higher the ratio is i
tural logarithms.
sbetween Debtors turnover ratio and the level of unde
funds ratio
f ling term funds deployed in fixed assets. Fixed as
less, fixed assets are good scale to measure the long r
funds
erence between fixed assets to long term funds ratio
ow many times interest charges are covered by fun
io indicates that the firm is conservative in using debt
eciation and tax / Interest
ference between Interest coverage ratios with the leve
ys capital may be tied up in the financing of raw mat
into the natural logarithms.
/ Average Inventory
erence between Inventory turnover ratio and the level
and taxation
ax that has been recorded before finalizing interest
into the natural logarithms to make standard value.
ociation between profit before depreciation and taxat
ciation and taxation
tion & tax has been recorded before finalized interes
it into the natural logarithms to make standard va
ciation between profit before interest, depreciation an
axation
t has been recorded before finalizing interest on debts
tural logarithms to remove the heteroskedasticity.
ifference between profit before interest and taxation
d
investment (ROI). The strategic aim of a business ente
natural logarithms to remove the heteroskedasticity.
oyed
Or
Capital employed
fference between Return of capital employed and the l
terms of equity shareholders funds. This ratio is an
since it indicates the return on the finished employed
d tax / net worth * 100
ifference between Return on net worth and the level o
has been recorded after finalizing interest on debts
www.iiste.org
el of underpricing.
reasonable and wheth-
indicating the better the
rpricing.
sets represent the gross
n efficiency.
ith the level of under-
s that are available for
and low ratio indicates
l of underpricing.
erials, work in progress
of underpricing.
on debts and make tax
ion and the level of un-
on debts, depreciation
lue and to remove the
d taxation and the level
and make tax payment.
and the level of under-
rprise is to earn a return
Net profit/ capital em-
evel of underpricing.
important yardstick of
by them.
underpricing.
nd make tax payment.
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European Journal of Business and ManagemISSN 2222-1905 (Paper) ISSN 2222-2839 (
Vol 4, No.14, 2012
However, we converted it into
heteroskedasticity.
H13: There is positive significant di
1.3.14 Long Term Debt-Equity RaThe ration compares long term debt
assets. This ratio would be of moreconverted it into the natural logarith
LTDE = Long- term debt / Shareh
H14: There is negative significant di
Estimation Proc:
=========================
EC(C,1) 1 2 LOGMAARO LO
LOGDEBTORS LOGFIXDAST
LOGROCE LOGRONW LOGTER
VAR Model estimation
D(LOGMAARO) =A(1,1)*(B(1,1)*LOGMAARO(-1)
C(1,2)*D(LOGMAARO(-2)) + C
C(1,6)*LOG_DEBEQ + C(1,7
C(1,10)*LOGDEBTORS+ C(1,11)
C(1,14)*LOGPBDTM + C(1,15
C(1,18)*LOGRONW + C(1,19)*L
D(LOGUNDER) =
A(2,1)*(B(1,1)*LOGMAARO(-1)
C(2,2)*D(LOGMAARO(-2)) +
C(2,6)*LOG_DEBEQ + C(2,7
C(2,10)*LOGDEBTORS+ C(2,11)C(2,14)*LOGPBDTM + C(2,15
C(2,18)*LOGRONW + C(2,19)*L
5.0 Data collection and result anal
The data for the study was
http://www.bse-india.com/IPO und
from CMIE & Capital line database
Dec 2011. BSE was selected for thi
volumes.
Insert Table 2 Magnitude of initia
Insert Table 3 Descriptive results
independent variables
Insert Figure 1 Details for IPOs li
Insert Figure 2
Insert Table 4 unit root test by KP
Insert Table 5 VAR results showiiables
Insert Table 6 Results of null hyp
ntnline)
5
the natural logarithms to make standard value
fference between profit after interest and tax and the l
tio
to the new worth of the firm i.e the capital and free
interest to the contributories of long term finance to tms to make standardized value and to remove the het
olders net worth
ifference between long term debt- equity ratio and the
=====
UNDER @ LOG_DEBEQ LOGAPATM LOG
OGINTCVR LOGINVNTRY LOGPBDTM LOG
DEBTE
B(1,2)*LOG UNDER(-1) + B(1,3)) + C(1,1)*
(1,3)*D(LOGUNDER(-1)) + C(1,4)*D(LOG UN
*LOGAPATM + C(1,8)*LOGCPM + C(1,9
*LOGFIXDAST + C(1,12)*LOGINTCVR + C(1,
)*LOGPBIDTM + C(1,16)*LOGPBITM +
GTERMDEBTE
+ B(1,2)*LOGUNDER(-1) + B(1,3)) + C(2,1)*
(2,3)*D(LOGUNDER(-1)) + C(2,4)*D(LOGUND
*LOGAPATM + C(2,8)*LOGCPM + C(2,9
*LOGFIXDAST + C(2,12)*LOGINTCVR + C(2,)*LOGPBIDTM + C(2,16)*LOGPBITM +
GTERMDEBTE
ysis
btained from the website of the Bombay st
r the heading of book building in IPOS. We also s
. The period for which the data was taken for the stu
study because it is the largest exchange in the countr
public offer at Bombay stock exchange (2000-201
of all variables i.e. dependent variable such as LO
ted at Bombay stock exchange
SS
g relationship between dependent variable with o
thesis @ 5% significance level t= 1.64 one tailed te
www.iiste.org
and to remove the
vel of underpricing.
reserves less intangible
he firm. Afterwards weroskedasticity.
level of underpricing.
CPM LOGCURRNTR
BIDTM LOGPBITM
(LOGMAARO(-1)) +
ER(-2)) + C(1,5) +
)*LOGCURRNTR +
13)*LOGINVNTRY +
(1,17)*LOGROCE +
(LOGMAARO(-1)) +
ER(-2)) + C(2,5) +
)*LOGCURRNTR +
13)*LOGINVNTRY +(2,17)*LOGROCE +
ck Exchange (BSE)
pplemented these data
y was Oct 2008 to 31st
y in relations of trading
)
Maaro and all other
ther independent var-
st
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European Journal of Business and ManagemISSN 2222-1905 (Paper) ISSN 2222-2839 (
Vol 4, No.14, 2012
Insert Table 7 Results of null hyp
Insert Figure 3
6. Results & findings of VAR by L
Based on the multiple linear VARpreciation & tax, Return on capital
of underpricing by taken LOGMA
level of underpricing at 5 % signifi
nificant negative effect on the level
cant association between current rat
ratio contains no effecton the level
cant dissimilarity between credito
Therefore, null hypothesis 3 is acce
level of underpricing at 5% signific
ble. Therefore, null hypothesis 4 is
ratio and level of underpricing at 5
is no significant dissimilarity bet(t= .64). Therefore, null hypothesis
Insert Figure 4
Insert Figure 5
There is no significant associat
icance level (t= -.34). This reveals t
is accepted. There is no significant
pricing at 5% significance (t= -.36).
between profit before interest, dep
(t= .82). This reveals that profit bef
hypothesis 9 is accepted. There is
underpricing at 5% significance levof underpricing. Therefore, null hyp
capital employed and levelof unde
return on capital employed on the le
There is a significantdissimila
(t= -3.24). However, there is a nega
hypothesis 12 is rejected. There is a
of underpricing at 5 % significance
itive significant effect on the level
cant association between long term
reveals that long term debt equity h
Insert Figure 6
6.1. Results & findings of VAR b
Based on the multiple linear VAR r
return to the net worth show releva
is a significant relationship between
cance level (t value= 2.76). This ex
the level of underpricing. Therefor
turn on net worth and levelof und
effect of return on net worth on the
less, all other variables except RO
However, in that situation null hypo
Insert Figure 7
7.0. Discussion
The results of the numerous VAR an
it was constructed that the variabl
ntnline)
6
thesis @ 5% significance level t= 1.96
OGMAARO
esults it was construct that the variables' debt-equitymployed and return on net worth show significant rel
RO. There is a significant relationship between the d
ance level (t value= -2.05). This examined that debt
of underpricing. Therefore, null hypothesis 1 is rejec
io and level of underpricing at 5% significance level
of underpricing. Therefore null hypothesis 2 is accep
payment period and level of underpricing at 5%
ted. There is no significant association between de
nce level (t= -.61). This reveals that debtors turnov
accepted. There is no significant relationship betwe
significance level (t=-.21). Therefore, null hypothe
een interest coverage ratio and level of underpriciis accepted.
ion between inventory turnover ratio and level of un
hat inventory turnover ratio has not acceptable. Ther
dissimilarity between profit before depreciation and
Therefore, null hypothesis 8 is accepted. There is n
reciation and taxation and level of underpricing at
re interest, depreciation and taxation ratio has not acc
o significant association between profit before inter
el (t=-.011). The rofit before interest and tax contaiothesis 10 is accepted. There is a significantdissimil
rpricing at 5% significance (t= 2.76). However, ther
vel of underpricing. Therefore, null hypothesis 11 is r
ity between return on net worth and levelof underpri
ive effect of return on net worth on the level of under
significant relationship between the profit after inter
level (t value= 1.99). This examined that profit after i
f underpricing. Therefore, null hypothesis 13 is rejec
ebt equity and level of underpricing at 5% significan
s not acceptable. Therefore, null hypothesis 14 is acc
LOG UNDER
esults it was constructed that the variables' Return o
t relationship at the level of underpricing by capture
the return on capital employed and the level of und
amined that return on capital employed has the signi
, null hypothesis 11 is rejected. There is a weighty di
rpricing at 5% significance (t= -2.80). Notwithstand
level of underpricing. As a result, null hypothesis 1
CE & RONW have no significant association at th
hesis is approved.
alyses are contained in Table 10. Based on the multip
s' debt-equity ratio, Profit after depreciation & tax,
www.iiste.org
ration, Profit after de-ationship with the level
ebt-equity ratio and the
quity ratio has the sig-
ed. There is no signifi-
(t=-.1.14). The current
ted. There is no signifi-
significance (t= -.67).
btors turnover ratio and
r ratio has not accepta-
n fixed assets turnover
sis 5 is accepted. There
ng at 5% significance
erpricing at 5% signif-
fore, null hypothesis 7
tax and levelof under-
significant association
5% significance level
eptable. Therefore, null
st and tax and level of
s no effecton the levelarity between return on
is a positive effect of
jected.
cing at 5% significance
pricing. Therefore, null
st and tax and the level
nterest and tax has pos-
ed. There is no signifi-
ce level (t= -.036). This
pted.
capital employed and
d LOG UNDER. There
rpricing at 5 % signifi-
ficant positive effect of
issimilarity between re-
ing, there is a negative
is declined. Neverthe-
level of underpricing.
le additive VAR results
Return on capital em-
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European Journal of Business and ManagemISSN 2222-1905 (Paper) ISSN 2222-2839 (
Vol 4, No.14, 2012
ployed and return to the net worth
LOGMAARO. Nevertheless, Base
Return on capital employed and ret
ing by interpreted LOG UNDER.
The result pointing to the nega
temporary study is in confirmationworth leads to increase in supply of
relationship of return on capital em
with result found by (Bansal and K
ship between offer timing and level
level of underpricing in the present
8.0. Conclusions
Taking into account all firms which
for the period 1999 until 2011, this
ticular, an average underpricing lev
proach, the degree of underpricing i
sis. Nevertheless, there is limited s
ex- ante information and have a mo
evant negative effect on short-run u
significant relationship with other
current ratio and fixed assets ratio a
The results obtained from this
sistent with developed and other
strategy of buying the fresh issues
withstanding, the study also reveals
of the initial returns is found on th
fourth day of trading.
References
1) Allen, F. Faulhaber, G. (1989).ics.23, 303-323.
2) An, H. Chan, K.C. (2008). Cre3) Baker, M. Wurgler, J. (2007). In
129-151
4) Baron, David. P. Bengt, Holmsmetric Information, Delegation
5) Baron, D.P. (1982). A Model oNew Issues. The Journal of Fin
6) Barry, C.B. Brown, S. (1985).Quantitative Analysis. 20, 407
7) Balwinder, Singh. P,K. Mittal. (plied Finance. 9(2), 29-39.8) Bansal, R. and Khanna, A. (201Bombay stock exchange India,
9) Bansal. R and Khanna, R. (201Evidence from 2008-2011. Asi
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14) Bansal. R and Khanna, R. (201International journal of researc
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7
show significant relationship with the level of und
on the multiple additive VAR results it was constru
rn to the net worth show significant relationship with
tive relationship ofreturn on net worth and level of u
of the result construct by in their study. It can be ishare in IPO, leading to lesser underpricing. The resu
ployed and level of underpricing in the present stud
hanna, 2012) in their study.(Singh & Mittal, 2003),
l of underpricing there is no significant relationship
tudy.
completed public on the official market of the Stoc
study examines the evidence on the short-run under-
el within the range 50% is found based on first day.
s explained by the ex-ante uncertainty hypothesis and
pport for the signaling hypothesis. In particular, the
mentous positive impact on the initial returns while t
nderpricing. At the same time, the results show that
xplanatory factors such as Debtor's turnover ratio, c
d the level of underpricing.
study show that fresh issues on the BSE are subjec
merging markets. In this respect, prospective inves
at the offer and selling them immediately on the initi
that investors should not hold new issues very long as
first day of trading and that the average initial retur
Signaling by under pricing in the IPO market. Journa
it Ratings and IPO Pricing. Journal of Corporate Fina
vestor Sentiment in the Stock Market. Journal of Eco
rom. (1980). the Investment Banking Contract for N
and the Incentive Problem. Journal of Finance. 35, 11
the Demand for Investment Banking Advising and
nce. 37, 955-976.
ifferential information and security market equilibriu
422.
2003). Underpricing of IPOs, Indian. Experience. Th
12). Pricing mechanism and explaining underpricing
International journal of research in finance and mark
2), Post Indian stock markets crisis and its impact
an journal of management research, ISSN- 2229-379
12), IPOs underpricing and money left on the ta
h in Management, Economics and Commerce, 2 (6),
), Share holdings pattern and its impact on IPO Un
, Asian journal of research in business, econom
2), Does ownership structure affecting IPO underpr
rnal of business economics and management research
2), IPO underpricing cloud or rain: Even commenci
al of management and Behavioural science, Vol.1,
), Analysis of IPO underpricing: Evidence from Bo
in commerce, it & management, Vol.2, no.8, pp- 01-
www.iiste.org
rpricing by interpreted
cted that the variables'
the level of underpric-
nderpricing in the con-
informed that large netlt is indicating positive
is in the confirmation
Regarding the relation-
etween firms age and
Exchange of Bombay
ricing of IPOs. In par-
Using a regression ap-
the signaling hypothe-
results disclose that the
he signaling has no rel-
there is no statistically
editor payment period,
t to underpricing, con-
tors should pursue the
ial day of trading. Not-
the highest component
ns turn negative on the
l of Financial Econom-
nce. 14, 585-595.
omic Perspectives. 21,
ew Issues under Asym-
151138.
istribution Services for
m. Journal of Financial
e ICFAI Journal of Ap-
of IPOs, evidence from
eting, 2(2), 205-216.
on IPOs underpricing:
, 3 (1), 01-11.
le in Indian market,
106-120.
derpricing: after Indian
ics and management,
icing: A case of Indian
, 3(5), 39-51.
ng from Bombay stock
SSN. 2278- 5671, pp-
mbay stock Exchange,
6.
-
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15) Benveniste, L.M. Spindt, P.A.new issues. Journal of Financial
16) Dolvin, S.D. Jordan, B.D. (20shareholders. Journal of Busine
17) Deb, S. S. Merisetty, V. B. (2012294-2305.
18) Kumar, S.S.S. (2010). Is bookresearch journal of finance and
19) Ibbotson, R.G. (1975). Price p235-272.
20) Loughran, T. Ritter, J.R. (1994).2, 165-199.
21) Loughran, T. Ritter, J.R. (200Review of Financial Studies. 1
22) Leite, T. (2007). Adverse selecnance.13, 813-903.
23) McDonald, J.G. A, K. Fisher. (124) Megginson, W.L. K.A. Weiss.
Finance. 46, 879903.
25) Muscarella, C. J. Vetsuypens,Financial Economics. 24, 1251
26) Rock, K. (1986). Why new issu27) Ritter, J.R. (1991). The Long R28) Sherman, A.E. (2000). IPOs an
Studies.13, 697-714.
29) S, Richard. M, P, Luiz. (2006Global Finance Conference pro
30) Welch, I. (1989). Seasoned offeof Finance.47, 695-732
ntnline)
8
1989). How investment bankers determine the offer
l Economics. 24, 343-361.
08). Underpricing, overhang, and the cost of goin
ss Finance and Accounting. 35, 434-458.
0). Information content of IPO grading. Journal of
building an efficient pricing mechanism? The Indian
economics.38, 173-189.
rformance of common stock new issues. Journal of
Initial Public Offerings: international insights. Pacific
). Why dont issuers get upset about leaving money
, 413-443.
tion, public information, and underpricing in IPOs. J
972). New Issues Stock Price Behavior. Journal of Fi
(1991). Venture capitalist certification in initial publ
. R. (1989). A simple test of Baron's model of IPO u
35.
es are underpriced?. Journal of Financial Economics.
n Performance of Initial Public Offerings. The Journ
long term relationships, an advantage of book buildi
). Underpricing of Brazilian IPOs, Empirical Eviden
ceeding. Rio de Janeiro, Brazil (2006).
ings, imitation costs and the under pricing of initial p
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price and allocation of
public to pre-exiting
anking & Finance. 34,
evidence. International
inancial Economics. 2,
Basin Finance Journal.
on the table in IPOs?.
ournal of corporate Fi-
ance, 97-102.
ic offerings. Journal of
nderpricing. Journal of
15, 187-212.
l of Finance. 46, 3-27.
g. Review of Financial
ce from 1999 to 2005.
blic offerings, Journal
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European Journal of Business and ManagemISSN 2222-1905 (Paper) ISSN 2222-2839 (
Vol 4, No.14, 2012
Appendix- list of tables
Varib
ales
Description Measurement
LOGD
EBEQ
Debt-Equity
Ratio
Debt- equity rati
financial stabilit
into the natural l
LOGA
PATM
Profit after
interest and
tax
Total profit after
However, we c
heteroskedasticit
LOGC
PM
Creditors
payment
period
The measureme
purchased by the
LOGC
URRN
TR
Current Ratio Current ratio is c
the firm in the sh
LOGD
EBTO
RS
Debtors
turnover ratio
Debtors turnove
the company has
LOGF
IXDA
ST
Fixed Assets
to long term
funds ratio
This ratio indica
assets minus dep
LOGI
NTCV
R
Interest cov-
erage ratio
The interest cov
payment of inter
excessive use of
LOGI
NVNT
RY
Inventory
turnover ratio
A considerable a
and finished goo
LOGP
BDT
M
Profit before
depreciation
and taxation
Total profit befo
payment. Howev
LOGP
BIDT
M
Profit before
interest de-
preciation
and taxation
Total profit befo
ciation on equity
value and to rem
LOGP
BITM
Profit before
interest and
taxation
Total profit befo
ment. However,
LOGR
OCE
Return on
capital em-
ployed
This ratio is also
return on capital.
employed.
LOGR
ONW
Return on net
worth
The ratio expres
performance for
after interest and
LOGT
ERM
DEBT
E
Long Term
Debt-Equity
Ratio
The ration comp
assets. This ratio
converted it into
LOG
MAA
RO
Market ad-
justed return
on under-
pricing
We collected ini
We can correcti
logarithms to ma
ntnline)
9
o indicates the relationship between loan funds and new worth o
of the firm. We have taken previous Year before issuing IPO yea
garithms to make standardized value and to remove the heterosked
interest & tax that has been recorded after finalizing interest on
onverted it into the natural logarithms to make standard
.
nt of the creditor turnover period shows the average time taken t
company. Average creditor/ credit purchase * 365
alculated current assets divided by current liabilities. It is indicatin
ort term. We have taken current ratio to reveal liquidity condition o
r, which measures whether the amount of resources tied up in debto
been efficient in converting debtors into cash. We converted it into
es the proportion of ling term funds deployed in fixed assets. Fi
eciation. Nevertheless, fixed assets are good scale to measure the
rage ratio shows how many times interest charges are covered b
st. A very high ratio indicates that the firm is conservative in usin
ebt.
mount of a companys capital may be tied up in the financing of ra
s. We converted it into the natural logarithms.
re depreciation & tax that has been recorded before finalizing int
er, we converted it into the natural logarithms to make standard val
e interest, depreciation & tax that have been recorded before finali
and make tax payment. However, we converted it into the natural
ve the heteroskedasticity.
re interest & tax that has been recorded before finalizing interest
e converted it into the natural logarithms to remove the heteroske
called as return on investment (ROI). The strategic aim of a bu
We converted it into the natural logarithms to remove the heteros
es the net profit in terms of equity shareholders funds. This ratio
equity shareholders since it indicates the return on the finished e
tax / net worth * 100
res long term debt to the new worth of the firm i.e. the capital an
would be of more interest to the contributories of long term finan
the natural logarithms to make standardized value and to remove th
ial return on listing days of IPOs than we correct these return wit
e the market moments and to avoid any market co incidence. We
ke standard value and to remove the heteroskedasticity.
www.iiste.org
the company, the long term
. Afterwards we converted it
asticity.
ebts and make tax payment.
value and to remove the
pay for goods and services
g the liquidity & solvency of
f a company.
rs, is reasonable and whether
the natural logarithms.
ed assets represent the gross
long run efficiency.
funds that are available for
debt and low ratio indicates
materials, work in progress
erest on debts and make tax
ue.
zing interest on debts, depre-
logarithms to make standard
on debts and make tax pay-
asticity.
siness enterprise is to earn a
edasticity. Net profit/ capital
is an important yardstick of
mployed by them. Net profit
free reserves less intangible
e to the firm. Afterwards we
e heteroskedasticity.
h market index performance.
converted it into the natural
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European Journal of Business and ManagemISSN 2222-1905 (Paper) ISSN 2222-2839 (
Vol 4, No.14, 2012
Magnitude of IPOs
Table no 2. It contains magnitude o
divided on the basis of IPO that lis
and overpricing in different years. I
fixed price option. ata is collecte
nism (BB), fixed price option (FPO)
price option underpricing (FPOU),
Year BS
E
Iss
ue
B
B
FP
O
BB-Un
er
2000 67 11 56 6
2001 10 2 8 0
2002 5 1 4 0
2003 11 4 7 3
2004 25 17 8 9
2005 67 48 19 26
2006 89 68 21 36
2007 10
5
91 14 58
2008 38 33 5 16
2009 21 21 0 14
2010 73 71 2 472011 39 38 1 19
Total 55
0
40
5
145 234
ntnline)
10
IPOs after Indian stock market crisis since October
ed via book build and fixed price option. It is also sh
t segregates issue that is priced through book build a
with BSE websites and Capitaline database. Howe
, Book building underpricing (BBU), Book building o
nd fixed price option overpricing (FPOO).
BB-Ov
er
FPO-Und
er
FPO-ov
er
%
BBU
%B
O
5 30 26 21.96 -46.
2 2 6 0.00 -62.
1 4 0 0.00 -50.
1 5 2 90.16 -87.
8 6 2 54.43 -45.
21 14 5 31.47 -51.
32 14 7 36.75 -46.
32 7 7 51.54 -21.
17 2 3 36.45 -26.
7 0 0 19.09 -14.
24 2 0 22.35 -12.19 0 1 47.36 -33.
169 86 59 34.29 -41.
www.iiste.org
2000 to dec 2011. It is
ows % of underpricing
d that is price through
ver Book build mecha-
verpricing (BBO), fixed
B
%FPO
U
%FPO
O
7 191.32 -32.3
0 47.50 -52.0
3 16.07 0.0
1 97.86 -85.3
5 74.10 -56.0
5 60.37 -63.8
3 38.91 -25.0
2 113.67 -3.3
6 18.06 -32.3
2 0.00 0.0
5 60.77 0.02 0.00 -70.4
6 59.88 -35
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European Journal of Business and ManagemISSN 2222-1905 (Paper) ISSN 2222-2839 (
Vol 4, No.14, 2012
Descriptive statistics results
Varia-
bles
Me
an
Me
dian
Maxi
mum
LOG
DEBEQ
-0.
07
0.01 4.28 -
LOG
APATM
2.2
2
2.19 6.94 -1
LOG
CPM
2.4
9
2.42 6.94 -
LOG
CURRN
TR
0.6
8
0.43 3.94 -1
LOG
DEBTO
RS
2.0
5
1.74 10.37 -
LOGFIXDA
ST
1.12
1.24 4.29 -
LOG
INTCV
R
1.9
0
1.49 6.78 0
LOG
INVNT
RY
2.2
3
2.32 7.61 -
LOG
MAAR
O
2.6
3
3.00 4.96 -
LOGPBDTM
2.74
2.79 7.05 -
LOG
PBIDT
M
3.0
8
2.97 7.17 -
LOG
PBITM
2.8
8
2.86 7.17 -
LOG
ROCE
2.8
4
2.95 5.23 -1
LOG
RONW
2.9
3
3.22 5.11 -
LOGTERM
DEBTE
-0.32
-0.24
3.58 -
Table no 3; descriptive resu
ntnline)
11
ini
um
Std.
Dev.
Skew
ness
Kurt
osis
Jarque
-Bera
Proba
bility
.61 1.46 -0.32 4.80 12.43 0.00 -
7
1.20 1.35 0.09 3.85 2.60 0.27 1
.
.27 1.22 0.22 4.11 4.91 0.09 2
.
1.27 0.81 1.11 5.53 38.61 0.00 5
5
.31 1.63 2.42 11.3
2
316.29 0.00 1
.
.21 1.45 -0.19 3.07 0.50 0.78 98
.00 1.66 1.32 4.10 28.04 0.00 1
.
.60 1.57 0.41 3.58 3.45 0.18 1
.
.49 1.40 -0.47 2.35 4.43 0.11 2
.
.17 1.26 -0.16 4.02 3.91 0.14 2.
.13 1.13 -0.11 5.03 14.21 0.00 2
.
.87 1.27 -0.31 4.59 9.89 0.01 2
.
1.14 1.17 -1.25 4.68 30.94 0.00 2
.
.30 1.10 -1.19 4.39 26.03 0.00 2
.
.61 1.32 -0.24 5.16 16.65 0.00 -1
lts of variables
www.iiste.org
u
m
Sum
Sq.De
v
Ob-
servati
on
.9
172.25 82
81
9
147.08 82
03
9
119.81 82
5.
6
52.99 82
68
0
215.40 82
1.7
170.56 82
55
5
224.12 82
82
5
199.22 82
15
2
158.10 82
243
128.95 82
52
9
103.35 82
36
2
130.08 82
32
1
110.32 82
40
6
98.81 82
6.0
140.24 82
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European Journal of Business and ManagemISSN 2222-1905 (Paper) ISSN 2222-2839 (
Vol 4, No.14, 2012
Kwiatkowski-Phillips-Schmidt-Sh
Null Hypothesis: LOGMAARO is s
Kwiatkowski-Phillips-Schmidt-Shin
Asymptotic critical v
*Kwiatkowski-Phillips-Schmidt-Shi
Residual variance (no correction)
HAC corrected variance (Bartlett ke
S.E. of regression
Sum squared resid
Durbin-Watson stat
Table 4Kw
ntnline)
12
in test statistic
ationary
test statistic
alues*: 1% level
5% level10% level
n (1992, Table 1)
rnel)
1.298001 Akaike info criterion
497.0176 Schwarz criterion
1.761576 Hannan-Quinn criter.
iatkowski-Phillips-Schmidt-Shin test statistic result
www.iiste.org
LM-Stat.
0.43563
0.73900
0.463000.34700
1.67911
2.46398
3.36290
3.37536
3.36789
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European Journal of Business and ManagemISSN 2222-1905 (Paper) ISSN 2222-2839 (
Vol 4, No.14, 2012
Table no 5. Vector Auto regression
pricing (LOG Under & LOG Maaro
subscription level, pricing mechani
we compare level of underpricing
adjusted return (Maaro) and tried ttionship among variables by using t
Included observations: 79 after a
Standard errors in ( ) & t-statistics in [ ]
Variables D(LOGMAARO)
CointEq1
0.354942
(0.37798)
[ 0.93906]
D(LOGMAARO(-1
-0.772243
(0.36494)
[-2.11611]
D(LOGMAARO(-2))
-0.202505
(0.29371)
[-0.68947]
D(LOGUNDER(-1))
0.235222
(0.45764)
[ 0.51399]
D(LOGUNDER(-2))
0.004081
(0.32926)
[ 0.01239]
C
0.892944
(0.92384)
[ 0.96656]
LOG_DEBEQ
0.406014
(0.24486)
[ 1.95812]
LOGAPATM
1.143779
(0.63709)
[ 1.99532]
LOGCPM
-0.973829
(1.45314)
[-0.67015]
LOGCURRNTR
-0.318729
(0.27800)
[-1.14653]
LOG MAARO
R-squared 0.466639
Adj. R-squared 0.294878
Sum sq. resids 138.8104
S.E. equation 1.533858
F-statistic 2.716798
Log likelihood -134.3608
Akaike AIC 3.907868
Schwarz SC 4.507728
Mean dependent 0.018713
S.D. dependent 1.826640
ntnline)
13
model expresses association among the dependent
) with independent variables i.e. firms age, issue siz
m and ownership structure @ 5% & 10% significan
ith two methods. First is traditional underpricing met
find any association of market moments. Resultsstatistics and p-value.
justments
D(LOGUNDER Variables D(LOGMA
0.976004
(0.34811)
[ 2.80373]
LOGDEBTORS
-0.0717
(0.1171
[-0.612
-0.563798
(0.33610)
[-1.67747]
LOGFIXDAST
-0.0347
(0.172
[-0.201
-0.081807
(0.27050)
[-0.30242]
LOGINTCVR
0.1385
(0.148
[ 0.933
0.239315
(0.42148)
[ 0.56779]
LOGINVNTRY
-0.0420
(0.120
[-0.348
-0.031882
(0.30324)
[-0.10514]
LOGPBDTM
-0.5467
(1.498
[-0.364
0.490037
(0.85084)
[ 0.57594]
LOGPBIDTM
0.5418
(0.643
[ 0.842
0.379931
(0.22552)
[ 1.68472]
LOGPBITM
-0.0092
(0.797
[-0.011
0.771619
(0.58675)
[ 1.31507]
LOGROCE
1.3609
(0.491
[ 2.768
-0.018673
(1.33832)
[-0.01395]
LOGRONW
-1.6153
(0.497
[-3.245
-0.119307
(0.25603)
[-0.46599]
LOGTERMDEBTE
-0.0089
(0.242
[-0.036
LOGUNDER
0.488971Determinant resid covariance (dof
adj.)0.324403
117.7405
1.412657Determinant resid covariance
2.971229
-127.8580Log likelihood
3.743241
4.343101Akaike information criterion
-0.007724
1.718671 Schwarz criterion
www.iiste.org
ariable level of under-
, market capitalization,
ce level. In this model
od & second is market
how a significant rela-
RO D(LOGUNDER)
67
11)
81]
-0.035667
(0.10786)
[-0.33069]
29
0)
4]
0.054115
(0.15878)
[ 0.34081]
55
0)
4]
0.088136
(0.13668)
[ 0.64485]
58
5)
88]
-0.003245
(0.11103)
[-0.02923]
12
9)
2]
-1.163609
(1.38055)
[-0.84286]
79
2)
18]
0.608214
(0.59258)
[ 1.02638]
05
3)
55]
0.023359
(0.73405)
[ 0.03182]
50
4)
17]
0.970093
(0.45279)
[ 2.14246]
33
2)
8]
-1.285052
(0.45839)
[-2.80340]
36
0)
82]
-0.171438
(0.22353)
[-0.76697]
0.694054
0.387118
-186.7057
5.790018
7.049725
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European Journal of Business and ManagemISSN 2222-1905 (Paper) ISSN 2222-2839 (
Vol 4, No.14, 2012
S.No. Variables
1 LOG_DEBEQ
2 LOGAPATM
3 LOGCPM
4 LOGCURRNTR
5 LOGRONW
6 LOGTERMDEBTE
7 LOGDEBTORS
8 LOGFIXDAST
9 LOGINTCVR
10
LOGINVNTRY11 LOGPBDTM
12 LOGPBIDTM
13 LOGROCE
14 LOGPBITM
Tab
S.No. Variables
1 LOG_DEBEQ2 LOGAPATM
3 LOGCPM
4 LOGCURRNTR
5 LOGRONW
6 LOGTERMDEBTE
7 LOGDEBTORS
8 LOGFIXDAST
9 LOGINTCVR
10 LOGINVNTRY11 LOGPBDTM
12 LOGPBIDTM
13 LOGROCE
14 LOGPBITM
Tab
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14
t-Statistic
t- value @ 5% t
=(1.64)
Null hy-
pothesis
H0
2.05812 1.64 Rejected
1.99532 1.64 Rejected
-0.67015 -1.64 Accepted
-1.14653 -1.64 Accepted
-3.24548 -1.64 Rejected
-0.03682 -1.64 Accepted
-0.61281 -1.64 Accepted
-0.20144 -1.64 Accepted
0.93364 1.64 Accepted
-0.34888
-1.64 Accepted
-0.36472 -1.64 Accepted
0.84218 1.64 Accepted
2.76817 1.64 Rejected
-0.01155 -1.64 Accepted
le no 6 null hypothesis results by Log Maaro
t-Statistic
t- value @ 5% t =
(1.64)
Null hy-
pothesis
H0
1.68472 1.64 Accepted1.31507 1.64 Accepted
-0.01395 -1.64 Accepted
-0.46599 -1.64 Accepted
-2.80340 -1.64 Rejected
-0.76697 -1.64 Accepted
-0.33069 -1.64 Accepted
0.34081 -1.64 Accepted
0.64485 1.64 Accepted
-0.02923 -1.64 Accepted
-0.84286 -1.64 Accepted
1.02638 1.64 Accepted
2.76817 1.64 Rejected
0.03182 1.64 Accepted
le no 7 Null hypothesis results by Log under
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Relationship
With
Dependent var
Positive
Positive
No relation
No relation
Negative
No relation
No relation
No relation
No relation
No relation
No relation
No relation
Positive
No relation
Relationship
With
Dependent var
No relationNo relation
No relation
No relation
Negative
No relation
No relation
No relation
No relation
No relationNo relation
No relation
Positive
No relation
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European Journal of Business and ManagemISSN 2222-1905 (Paper) ISSN 2222-2839 (
Vol 4, No.14, 2012
Appendix- List of figures
Figure no 1 indicating the listed of
axis we have taken years and on x a
been underpriced out of total IPOs
Fig
Figure 2 Number of I
0
50
100
150
2000 2001 2002 2003
noo
fipos
Num
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15
the initial public offers at Bombay stock exchange
is number of IPOs have been listed. It indicates the n
as listed at BSE.
ure 1 Number of IPOs and underpricing
POs was listed at Bombay stock exchange from (1
2004 2005 2006 2007 2008 2009 2010Year
ber of IPOs and Underpriced
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ince April 2000. On y
umber of IPOs that has
95-2011)
2011
Year
No of ipos
Underprcd
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Vol 4, No.14, 2012
Figure 3
Figure 4 Total amount wer
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16
Total amount raised by IPOs in Indian market
e raised by IPOs at the Bombay stock exchange fr
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m (1995-2011)
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7/31/2019 Effect of Market Crisis of Financial Efficiency on Underpricing_ an VAR Overview of Indian IPOs
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European Journal of Business and ManagemISSN 2222-1905 (Paper) ISSN 2222-2839 (
Vol 4, No.14, 2012
Figure 5 Details for IPOs unde
Figure 6 Graphical rep
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17
priced and their pricing mechanism (book build
esentation of Standard deviation for all independe
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fixed price option)
nt variables
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European Journal of Business and ManagemISSN 2222-1905 (Paper) ISSN 2222-2839 (
Vol 4, No.14, 2012
Figure 7Normality test o
Figure 8: Result of
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18
fdependent variable i.e. log underpricing by Jarque
statistics for Ex-ante variables are used in regressio
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Bera testing
model
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Vol 4, No.14, 2012
igure 9: Result of t statis
ntnline)
ics (Line graph) for Ex-ante variables are used in reg
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ression model
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