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|
|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.|
|Appears in Collections:||Finance Working Papers|
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