Impact Of 2020 Financial Crisis On Ipo Underpricing

Impact of 2020 financial crisis on ipo underpricing

The Impact of Global Financial Crisis on IPO Underpricing in Malaysian Stock Market

Posted: 30 May 2015

Date Written: May 28, 2015

Abstract

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.

Impact of 2020 financial crisis on ipo underpricing

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.

Impact of 2020 financial crisis on ipo underpricing

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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Impact of 2020 financial crisis on ipo underpricing