The Impact of Global Financial Crisis on IPO Underpricing in Malaysian Stock Market
Posted: 30 May 2015
Date Written: May 28, 2015
This study examines the impact of global financial crisis (GFC) on Initial Public Offering (IPO) underpricing in the context of an emerging market from January 2006 to December 2011.
Models consist of hierarchical and multivariate regressions have been evaluated.
Our results show, firstly, by comparison between the pre-GFC, GFC and post-GFC periods, it can be observed that IPOs initial returns (offer-to-close) are generally lower due to the crisis.
Secondly, IPO underpricing provides an average of 15 to 24 percent of initial returns to investors as recorded by pre-GFC period, and around 5 to 10 percent in the post-GFC period.
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Thirdly, financial crisis does not act as a moderator that worsen the relationship between underpricing of IPO and oversubscription ratio.
Lastly, this study dispels the notion that investors should totally shun IPO during crisis period as there are still positive initial returns among the new issues.
To the authors’ knowledge, this is the first study on the impact of the GFC on IPO underpricing in Malaysia.
Keywords: Global Financial Crisis, IPO Underpricing, initial returns, Malaysia
JEL Classification: E22, G01, G11, G24
Suggested Citation:Suggested Citation
Leow, Hon-Wei and Lau, Wee-Yeap, The Impact of Global Financial Crisis on IPO Underpricing in Malaysian Stock Market (May 28, 2015).
Available at SSRN: https://ssrn.com/abstract=2611587
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