Group Affiliation and the Performance of Initial Public Offerings in the Indian Stock Market
Marti G. Subrahmanyam
New York University - Stern School of Business
Vijaya B. Marisetty
RMIT University; Financial Research Network (FIRN)
NYU Working Paper No. FIN-06-026
We document the effects of group affiliation on the initial performance of the 2,713 Initial Public Offerings (IPOs) in India under three regulatory regimes during the period 1990-2004. We distinguish between two competing hypotheses regarding group affiliation and a firmâ¬"s initial stock market performance: the certification hypothesis and the â¬Stunnelingâ¬? hypothesis. We show that the underpricing of group companies is higher than that of stand-alone companies, lending support to the tunneling hypothesis. However, on an ex post basis, we find that group-affiliated companies have a higher probability of survival than their stand-alone counterparts: groups appear to support their affiliates to maintain their reputation.
Number of Pages in PDF File: 63
Keywords: Initial Public Offering (IPO), Underpricing, Business Groups, Certificationworking papers series
Date posted: November 3, 2008
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