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Please use this identifier to cite or link to this item: http://hdl.handle.net/2451/26310

Title: GROUP AFFILIATION AND THE PERFORMANCE OF INITIAL PUBLIC OFFERINGS IN THE INDIAN STOCK MARKET
Authors: Marisetty, Vijaya B
Subrahmanyam, Marti G
Keywords: Initial Public Offering (IPO)
Underpricing
Business Groups
Certification
Tunneling
Issue Date: Sep-2006
Series/Report no.: FIN-07-015
Abstract: We document the effects of group affiliation on the initial performance of 2,713 Initial Public Offerings (IPOs) in India under three regulatory regimes during the period 1990-2004. We distinguish between two competing hypotheses regarding group affiliation: the “certification” and the “tunneling” hypotheses. We lend support to the latter by showing that the underpricing of group companies is higher than that of stand-alone companies. We ascribe the higher initial returns of group IPOs to investor overreaction. Ex post, we find that group-affiliated companies have a higher probability of survival over the long term: groups support their affiliates to maintain their reputation.
URI: http://hdl.handle.net/2451/26310
Appears in Collections:Finance Working Papers

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