The Determinants of Survival of Initial Public Offerings in India: An Empirical Study
The IUP Journal of Financial Risk Management, Vol. XI, No. 4, December 2014, pp. 7-30
Posted: 4 Aug 2015
Date Written: August 4, 2015
A number of researchers have examined the performance of Initial Public Offerings (IPOs) both for short and long run. However, the empirical evidence on the survivability of issues in the aftermarket is quite scant, especially in India. In the light of huge volatility in the Indian IPO market and the high rate of failure of IPOs, a need arises to explore the survivability of IPOs in the aftermarket. Hence, this paper attempts to examine the survival profile of Indian IPOs for the period 1992-2011. In order to examine the influence of issue, market and company specific variables on the post-issue transition of IPOs into survivors and non-survivors, logistic regression model is estimated. Further, survival analysis methodology is employed to investigate the effect of observable factors on the survival time of the issue. The study reveals that issues with large size, more demand, backed by reputed lead managers and of older firms survive for longer duration. However, issues with high underpricing, high risk, more list delay and during the period of high market level as well as high IPO activity, survive for smaller duration in the aftermarket. The survival probability and the duration of IPO is positively affected if it belongs to information and communication, accommodation, construction, wholesale and retail trade, and finance and insurance sectors, and it is negatively affected if IPO belongs to agriculture and administration sectors.
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