DR. SHAILESH RASOTGI

Title:Underpricing in Public Offers: Indian perspective for policy initiativeYear: 2019

Authors: Shailesh Rastogi
Journal: International Journal of Finance and Accounting
Publication date: 2019 April
Publisher: Inderscience Publishers
URL: click here

Abstract

Initial public offering (IPO) underpricing is a common practice all over the world. Several studies have attempted to identify the causes of or reasons behind underpricing and explain the phenomenon. The influence of the secondary market on underpricing in the primary market has been explained by Mauer and Senbet (1992). However, the explanation provided by Mauer and Senbet (1992) is not empirically supported by the findings of the present study which considers an Indian context for the period 1998-2012. The three-pronged theory of secondary market influence on primary market: 1) incomplete spanning; 2) incomplete access; 3) seasonality, is not supported in the Indian context. Moreover, findings of this paper have implications that go beyond the three-pronged theory to explain the influence of the secondary market on underpricing in the primary market. This paper recommends the use of behavioural finance to justify instances of underpricing in India.

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