Group Affiliation and the Performance of Initial Public Offerings in the Indian Stock Market
63 Pages Posted: 3 Nov 2008
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Group Affiliation and the Performance of Initial Public Offerings in the Indian Stock Market
Group Affiliation and the Performance of Initial Public Offerings in the Indian Stock Market
Group Affiliation and the Performance of Initial Public Offerings in the Indian Stock Market
Date Written: September 2006
Abstract
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 firm’s initial stock market performance: the certification hypothesis and the “tunneling” 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.
Keywords: Initial Public Offering (IPO), Underpricing, Business Groups, Certification
Suggested Citation: Suggested Citation
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