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

Leow, Hon Wei and Lau, Wee Yeap (2018) The Impact of Global Financial Crisis on IPO Underpricing in Malaysian Stock Market. Review of Pacific Basin Financial Markets and Policies, 21 (04). p. 1850023. ISSN 0219-0915

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Official URL: https://doi.org/10.1142/S0219091518500236

Abstract

This study examines the impact of the 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 dummy variable 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 17-25% of initial returns in the pre-GFC period, 1-3% during GFC period, and 3-7% in the post-GFC period. Thirdly, the financial crisis does not act as a moderator that worsens 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.

Item Type: Article
Uncontrolled Keywords: Global financial crisis; IPO underpricing; Initial returns; Malaysia
Subjects: H Social Sciences > HG Finance
Divisions: Faculty of Economics & Administration
Depositing User: Ms. Juhaida Abd Rahim
Date Deposited: 17 Jun 2019 06:39
Last Modified: 17 Jun 2019 06:39
URI: http://eprints.um.edu.my/id/eprint/21480

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