Abstract

This paper attempts to empirically explore the determinants of the underpricing of Initial Public 2 Offerings ('IPOs')listed on the National Stock Exchange ('NSE'). Various theories explaining theunderpricing are examined and the regulatory framework around the IPOs is discussed. The resultsindicate that the offer price fixation by the merchant banker in book building process and the listingdelay positively impact the first day underpricing whereas the money spent on the marketing of theIPO, reputation of the Book Running Lead Manager ('BRLM'), issue size, IPO grading, age of thefirm, internal risk, equity retained by the promoters and the PSU/ Private classification of IPOs areinsignificant in explaining underpricing. This insignificance can be due to the idiosyncrasy of the IPOstudy based on the time period and the markets in which the study is conducted. The findings of thestudy have useful implications for the retail investors, policy makers, market intermediaries as well as investors in the book built IPO.

Authors and Affiliations