Determinants of Initial and Long-Run Performance of IPOs in Indian Stock Market

Abstract

The paper investigates the possible determinants of underpricing and the long-run performance of 438 Indian initial public offerings (IPOs) listed on the Bombay Stock Exchange during June 1992 – March 2001. The mean underpricing has been found to be 99.20 per cent, which is very high if compared with the international evidence. Age of the firm, listing delay at IPO and number of times the issue is subscribed have been found to be the important determinants of underpricing. Indian IPOs do not tend to underperform in the long-run and underpricing has been primarily found to explain the long-run performance. The study, thus provides evidence of overreaction hypothesis.