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Underwriter reputation and IPO valuation in an emerging market: evidence from Malaysia

Purpose – The purpose of this study is to examine the influence of underwriter reputation on the valuation of Malaysian initial public offerings (IPOs). Design/methodology/approach – This study employed cross-sectional multiple regression models to analyse the relationship between underwriter reputa...

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Main Authors: Chui, Zi Ong, Mohd Rashid, Rasidah, Taufil Mohd, Kamarun Nisham
Format: Article
Language:English
Published: Emerald Publishing Limited 2020
Subjects:
HB Economic Theory
Online Access:http://repo.uum.edu.my/27064/1/MF%202020%201%2022.pdf
http://repo.uum.edu.my/27064/
http://doi.org/10.1108/MF-11-2019-0579
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spelling my.uum.repo.270642020-06-04T01:36:09Z http://repo.uum.edu.my/27064/ Underwriter reputation and IPO valuation in an emerging market: evidence from Malaysia Chui, Zi Ong Mohd Rashid, Rasidah Taufil Mohd, Kamarun Nisham HB Economic Theory Purpose – The purpose of this study is to examine the influence of underwriter reputation on the valuation of Malaysian initial public offerings (IPOs). Design/methodology/approach – This study employed cross-sectional multiple regression models to analyse the relationship between underwriter reputation and IPO valuation that included 466 IPOs listed on Bursa Malaysia from 2000 to 2017. Findings – The results revealed that underwriter reputation had a significant negative association with IPO valuation. Firms that engaged the services of reputable underwriters had their IPO offer prices set lower than the intrinsic values during the listing. After incorporating firms’ size, this study found a positive relationship between underwriter reputation and IPO valuation. Big firms (high quality) hired reputable underwriters for certification purposes as issuers were aware that the cost of hiring a reputable underwriter would be justified by increased transparency after listing. Therefore, firms that engaged reputable underwriters had approximately fair values since issuers assumed that the price would be close to the intrinsic value following enhanced transparency post-listing. Research limitations/implications – Future studies should focus on other non-financial factors, such as auditor reputation. Originality/value – The present study provides new insights into the certification role of underwriters in valuing IPOs in the Malaysian market. Emerald Publishing Limited 2020 Article PeerReviewed application/pdf en http://repo.uum.edu.my/27064/1/MF%202020%201%2022.pdf Chui, Zi Ong and Mohd Rashid, Rasidah and Taufil Mohd, Kamarun Nisham (2020) Underwriter reputation and IPO valuation in an emerging market: evidence from Malaysia. Managerial Finance, ahead- (ahead-). pp. 1-22. ISSN 0307-4358 http://doi.org/10.1108/MF-11-2019-0579 doi:10.1108/MF-11-2019-0579
institution Universiti Utara Malaysia
building UUM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Utara Malaysia
content_source UUM Institutional Repository
url_provider http://repo.uum.edu.my/
language English
topic HB Economic Theory
spellingShingle HB Economic Theory
Chui, Zi Ong
Mohd Rashid, Rasidah
Taufil Mohd, Kamarun Nisham
Underwriter reputation and IPO valuation in an emerging market: evidence from Malaysia
description Purpose – The purpose of this study is to examine the influence of underwriter reputation on the valuation of Malaysian initial public offerings (IPOs). Design/methodology/approach – This study employed cross-sectional multiple regression models to analyse the relationship between underwriter reputation and IPO valuation that included 466 IPOs listed on Bursa Malaysia from 2000 to 2017. Findings – The results revealed that underwriter reputation had a significant negative association with IPO valuation. Firms that engaged the services of reputable underwriters had their IPO offer prices set lower than the intrinsic values during the listing. After incorporating firms’ size, this study found a positive relationship between underwriter reputation and IPO valuation. Big firms (high quality) hired reputable underwriters for certification purposes as issuers were aware that the cost of hiring a reputable underwriter would be justified by increased transparency after listing. Therefore, firms that engaged reputable underwriters had approximately fair values since issuers assumed that the price would be close to the intrinsic value following enhanced transparency post-listing. Research limitations/implications – Future studies should focus on other non-financial factors, such as auditor reputation. Originality/value – The present study provides new insights into the certification role of underwriters in valuing IPOs in the Malaysian market.
format Article
author Chui, Zi Ong
Mohd Rashid, Rasidah
Taufil Mohd, Kamarun Nisham
author_facet Chui, Zi Ong
Mohd Rashid, Rasidah
Taufil Mohd, Kamarun Nisham
author_sort Chui, Zi Ong
title Underwriter reputation and IPO valuation in an emerging market: evidence from Malaysia
title_short Underwriter reputation and IPO valuation in an emerging market: evidence from Malaysia
title_full Underwriter reputation and IPO valuation in an emerging market: evidence from Malaysia
title_fullStr Underwriter reputation and IPO valuation in an emerging market: evidence from Malaysia
title_full_unstemmed Underwriter reputation and IPO valuation in an emerging market: evidence from Malaysia
title_sort underwriter reputation and ipo valuation in an emerging market: evidence from malaysia
publisher Emerald Publishing Limited
publishDate 2020
url http://repo.uum.edu.my/27064/1/MF%202020%201%2022.pdf
http://repo.uum.edu.my/27064/
http://doi.org/10.1108/MF-11-2019-0579
_version_ 1669009604578639872
score 13.211869

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