Are IPOs underpriced? Empirical evidence from Saudi Arabia-Reference-Cited by-同舟云学术

Are IPOs underpriced? Empirical evidence from Saudi Arabia

Published:2023 Issue:2 Volume:20 Page:156-165
ISSN:1810-3057
Container-title:Corporate Ownership and Control
language:en
Short-container-title:COC

Author:

Samontaray Durga Prasad¹^ORCID,Al Zuwidi Abdullah Saud¹

Affiliation:

1. College of Business Administration, King Saud University, Saudi Arabia

Abstract

nderpricing of initial public offerings (IPOs) is a common phenomenon that widely studied over many periods and a broad range of countries. This paper examines the extent of underpricing of IPOs in Saudi Arabia by using the data of 44 IPOs listed on the Saudi Stock Exchange from January 2010 till October 2021. We found that IPOs on average were underpriced by 49.4%. The stepwise multiple regression results showed that the number of individual subscribers, the level of over-subscription by individuals, and the firm size have a significant relationship with IPO returns. The outcomes are hence consistent with the prediction of ex-ante uncertainty and the winners’ curse hypothesis.

Publisher

Virtus Interpress

Subject

General Business, Management and Accounting

Link

https://virtusinterpress.org/IMG/pdf/cocv20i2art13.pdf

Reference43 articles.

1. Abdul Rahim, R., & Yong, O. (2010). Initial returns of Malaysian IPOs and Shari’a‐compliant status. Journal of Islamic Accounting and Business Research, 1(1), 60–74. https://doi.org/10.1108/17590811011033415

2. Alanazi, A. S., & Al-Zoubi, H. A. (2015). Extreme IPO underpricing and the legal environment in wealthy emerging economies. Journal of Multinational Financial Management, 31, 83–103. https://doi.org/10.1016/j.mulfin.2015.05.004

3. Al-Hassan, A., Delgado, F., & Omran, M. (2010). The under-pricing of IPOs in the Gulf cooperation council countries. Research in International Business and Finance, 24(3), 344–360. https://doi.org/10.1016/j.ribaf.2010.03.002

4. Badru, B. O., & Ahmad-Zaluki, N. A. (2018). Explaining IPO initial returns in Malaysia: Ex-ante uncertainty vs signaling. Asian Review of Accounting, 26(1), 84–106. https://doi.org/10.1108/ARA-11-2016-0133

5. Baron, D. (1982). A model of the demand for investment banking advising and distribution services for new issues. The Journal of Finance, 37(4), 955–976. https://doi.org/10.1111/j.1540-6261.1982.tb03591.x