Article thumbnail

GROUP AFFILIATION AND THE PERFORMANCE OF INITIAL PUBLIC OFFERINGS IN THE INDIAN STOCK MARKET

By Vijaya B Marisetty and Marti G Subrahmanyam

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

Topics: Initial Public Offering (IPO), Underpricing, Business Groups, Certification, Tunneling
Year: 2006
OAI identifier:

Suggested articles


To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.