Determinants of IPO Underpricing in the National Stock Exchange of India

ICFAI Journal of Applied Finance, Forthcoming

24 Pages Posted: 7 Jan 2008 Last revised: 8 Aug 2012

See all articles by Alok Pande

Alok Pande

Government of India; Indian Institute of Management (IIMB), Bangalore

R. Vaidyanathan

Indian Institute of Management (IIMB), Bangalore

Date Written: December 1, 2007

Abstract

The National Stock Exchange (NSE) is India's first fully demutualized stock exchange. It is also the largest exchange in India in terms of volumes in both equity and derivatives segments. The previous studies on Initial Public Offerings (IPOs) in India have been largely confined to the Bombay Stock Exchange (BSE). This study looks at the pricing of IPOs in the NSE. In particular, it seeks to empirically explain the first day under pricing in terms of the demand generated during the book building of the issue, the listing delay between the closure of the book building and the first day listing of the issue and the money spent on the marketing of the IPO by the firms. It also seeks to understand any emerging patterns in Indian IPO market with reference to the previous studies. Moreover it seeks to find the post IPO returns for one month in the NSE. The results suggest that the demand generated for an issue during book building and the listing delay positively impact the first day under pricing whereas the effect of money spent on the marketing of the IPO is insignificant. We also find that in consonance with extant literature, the post IPO performance in one month after the listing for the firms under study is negative.

Keywords: National Stock Exchange (NSE), Initial Public Offerings (IPOs), Under Pricing

Suggested Citation

Pande, Alok and Vaidyanathan, Ramamurthy, Determinants of IPO Underpricing in the National Stock Exchange of India (December 1, 2007). ICFAI Journal of Applied Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1081272

Alok Pande (Contact Author)

Government of India ( email )

Indian Institute of Management (IIMB), Bangalore ( email )

Bannerghatta Road
Bangalore, Karnataka 560076
India

Ramamurthy Vaidyanathan

Indian Institute of Management (IIMB), Bangalore ( email )

Bannerghatta Road
Bangalore, 560076
India

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