The Underpricing Phenomenon of IPO: Prediction of Upcoming IPOs in Uzbekistan
Keywords:
initial public offering, lost capital, long-term underperformance, Signal theory, ownership concentration, information asymmetry, reputational capital
Abstract
Within the framework of this scientific work, an attempt was made to generalize and analyze the existing studies of foreign authors on the problem of the phenomenon of underpricing, to identify the most common world experience and unique characteristics. Based on the identification of key factors and drivers of underpricing, the most significant parameters of underpricing of initial public offerings were identified in relation to two past initial public offerings and future public offerings. Prior to this article, no factorial or other type of analysis of the underpricing of initial public offerings has been carried out in Uzbekistan. Based on a bibliographic analysis of foreign studies on the problem of the phenomenon of underpricing, seven main factors and five hypotheses were identified that presumably influence the underpricing of initial public offerings of companies.
In the course of the study, factors that have a significant impact on the occurrence and size of underpricing of company shares on the first day of trading were identified, the significance of these factors was assessed, and recommendations were given for the practical use of the study’s findings in upcoming initial public offerings.
References
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19. Leland H., Pyle D. (1977) Informational Asymmetries, Financial Structure, and Financial Intermediation // The Journal of Finance, Vol. 32, No. 2, Papers and Proceedings of the Thirty-Fifth Annual Meeting of the American Finance Association, Atlantic City, New Jersey, September, pp. 371-387
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21. Khudoykulov, H. A., & Sherov, A. B. (2021). Digital economy development in corporate governance of joint stock company. Экономика и бизнес: теория и практика, (3-2), 217-219.
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25. Muscarella, Chris J., and Vetsuypens, Michael R., A simple test of Baron’s model of IPO underpricing, Journal of Financial Economics, Vol.24, 125-136, 1989.
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27. Reilly, Frank K., and Hatfield, K., Investor experience with new stock, Financial Analysts Journal, Vol.25, 73-80, 1969.
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32. Шеров, А. Б., & Юнусов, С. Ю. Ў. (2022). ПЕРСПЕКТИВЫ РАЗВИТИЯ ЦИФРОВОЙ ЭКОНОМИКИ В УЗБЕКИСТАНЕ. Scientific progress, 3(3), 667-671.
33. Rydqvist, K., Högholm, K., 1995. Going public in the 1980s: Evidence from Sweden, European Financial Management, 1(3), pp. 287-315
34. Su, C., Bangassa, K., 2011. The impact of underwriter reputation on initial returns and long-run performance of Chinese IPOs, Journal of International Financial Markets, 21(5), pp. 760-791.
35. Tinic S., (1988) Anatomy of initial public offerings of common stock. // Journal of Finance 43, 788–822.
36. Titman S., Trueman B. (1986) Information Quality and the Valuation of New Issues // Journal of Accounting and Economics, 8, 2, pp. 159-172.
37. Vos E., Cheung J. (1992) New Zeland IPO underpricing: the reputation factor // Small Enterprise Research, Vol 1 No 1.
38. Wang K. (1999) Hot and Cold Market Cycle and IPO Performance: Theory and Evidence // Zhejiang University - School of Business Administration, p.34.
2. Beatty R.P. and Welch I. Issuer Expenses and Legal Liability in Initial Public Offerings // Journal of Law and Economics. 1996. № 39.
3. Beatty, R.P., Ritter, J.R., 1986. Investment banking, reputation and the underpricing of initial public offerings. Journal of financial economics, 15 (1), pp. 213-232.
4. Benveniste L., Busaba W., Book-building vs. Fixed Price: An Analysis of Competing Strategies for Marketing IPOs // Journal of Financial and Quantitative Analysis, 32.
5. Booth, J.R., Smith, R.L., 1986. Capital rising, underwriting and the certification hypothesis. Journal of Financial Economics, 15(1), pp. 261-281.
6. Brealey, R.A., Myers, S.C., Allen, F., 2010. Principles of corporate finance. McGraw-Hill/Irwin.
7. Brennan M., Franks J. (1997) Underpricing, ownership and control in initial public offerings of equity securities in the UK // Journal of Financial Economics 45.
8. Carter R., Dark F., Singh A. (1998) Underwriter reputation, initial returns, and the long-run performance of IPO stocks // Journal of Finance 53, 285–311
9. Carter, R., Manaster S., 1990. Initial Public Offering and Underwriter reputation. The Journal of Finance, 45 (4), pp. 1045—1067.
10. Chambers D., Dimson E. (2009) IPO Underpricing over the Very Long Run // The Journal of Finance, Vol. LXIV, No. 3.
11. Draho, J., 2004. The IPO Decision: Why And How Companies Go Public. Edward Elgar Publishing, pp. 46-69
12. Espinasse, P., 2014. IPO: A Global Guide, Expanded. Hong Kong University Press, pp. 232-267
13. Feldman, D.N., Regulation A+ and Other Alternatives to a Traditional IPO. John Wiley & Sons, Inc.
14. Grinblatt M., Hwang C. (1989) Signaling and the pricing of unseasoned new issue // Journal of Finance 44, 393-420
15. Hanley, (1993) The underpricing of initial public offerings and the partial adjustment phenomenon. // Journal of Financial Economics 34(2): 231-250.
16. Ibbotson R.G., Sindelar J.L.,Ritter J.R., 1988. Initial Public Offerings. Journal of Applied Corporate Finance (1), pp. 37-45
17. Karimov, N., & Saydullaev, S. (2019). Prospects for the development of the stock market: The first IPO and SPO analysis conducted by the companies of Uzbekistan. Journal of Advanced Research in Dynamical and Control Systems, 11(7), 938-950. Retrieved from www.scopus.com
18. Koh F., Walter T. (1989) A direct test of Rock’s model of the pricing of unseasoned issues // Journal of Financial Economics 23, 251-272.
19. Leland H., Pyle D. (1977) Informational Asymmetries, Financial Structure, and Financial Intermediation // The Journal of Finance, Vol. 32, No. 2, Papers and Proceedings of the Thirty-Fifth Annual Meeting of the American Finance Association, Atlantic City, New Jersey, September, pp. 371-387
20. Ljungqvist, A.P., Wilhelm, W.J., 2003, IPO Pricing in the Dot-com Bubble, Journal of Finance 58(2), pp. 723-752.
21. Khudoykulov, H. A., & Sherov, A. B. (2021). Digital economy development in corporate governance of joint stock company. Экономика и бизнес: теория и практика, (3-2), 217-219.
22. Logue D. (1973). On the Pricing of Unseasoned Equity Issues: 1965-1969 // Journal of Financial and Quantitative Analysis, 91-103.
23. Marchisio, G., Ravasi, D., 2000. Family firms and the decision to go public: A study of Italian IPOs. SDA Bocconi
24. Megginson, W.L., Weiss, K.A., 1991. Venture Capitalist Certification in Initial Public Offerings, Journal of Finance, 46(3), pp. 879-903.
25. Muscarella, Chris J., and Vetsuypens, Michael R., A simple test of Baron’s model of IPO underpricing, Journal of Financial Economics, Vol.24, 125-136, 1989.
26. Bakberganovich, S. A. (2022). Ways of development of digital economy in the country. Web of Scientist: International Scientific Research Journal, 3(10), 439-442.
27. Reilly, Frank K., and Hatfield, K., Investor experience with new stock, Financial Analysts Journal, Vol.25, 73-80, 1969.
28. Ritter J. (1984) The Hot Issue Market of 1980 // Journal of Business, 57, 215-240.
29. Ritter, J. (2000) Money Left on the Table in IPO’s. // Working Paper, University of Florida.
30. Rock, K., 1986, Why New Issues are Underpriced, Journal of Financial Economics 15, pp. 187–212.
31. Rock, K., Why new issues are underpriced, Journal of Financial Economics, Vol.15, 187-212, 1986.
32. Шеров, А. Б., & Юнусов, С. Ю. Ў. (2022). ПЕРСПЕКТИВЫ РАЗВИТИЯ ЦИФРОВОЙ ЭКОНОМИКИ В УЗБЕКИСТАНЕ. Scientific progress, 3(3), 667-671.
33. Rydqvist, K., Högholm, K., 1995. Going public in the 1980s: Evidence from Sweden, European Financial Management, 1(3), pp. 287-315
34. Su, C., Bangassa, K., 2011. The impact of underwriter reputation on initial returns and long-run performance of Chinese IPOs, Journal of International Financial Markets, 21(5), pp. 760-791.
35. Tinic S., (1988) Anatomy of initial public offerings of common stock. // Journal of Finance 43, 788–822.
36. Titman S., Trueman B. (1986) Information Quality and the Valuation of New Issues // Journal of Accounting and Economics, 8, 2, pp. 159-172.
37. Vos E., Cheung J. (1992) New Zeland IPO underpricing: the reputation factor // Small Enterprise Research, Vol 1 No 1.
38. Wang K. (1999) Hot and Cold Market Cycle and IPO Performance: Theory and Evidence // Zhejiang University - School of Business Administration, p.34.
Published
2023-01-24
How to Cite
Saydullaev, S. S. (2023). The Underpricing Phenomenon of IPO: Prediction of Upcoming IPOs in Uzbekistan. Central Asian Journal of Innovations on Tourism Management and Finance, 4(1), 133-148. https://doi.org/10.17605/OSF.IO/RZH3P
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