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Leverage and IPO pricing: 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: Ong, Chui Zi, Mohd Rashid, Rasidah, Taufil Mohd, Kamarun Nisham
Format: Article
Language:English
Published: UUM Press 2020
Subjects:
HG Finance
Online Access:http://repo.uum.edu.my/27453/1/IJBF%2015%201%202020%201%2019.pdf
http://repo.uum.edu.my/27453/
http://doi.org/10.32890/ijbf2020.15.1.9929
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spelling my.uum.repo.274532020-09-09T03:18:41Z http://repo.uum.edu.my/27453/ Leverage and IPO pricing: Evidence from Malaysia Ong, Chui Zi Mohd Rashid, Rasidah Taufil Mohd, Kamarun Nisham HG Finance 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. UUM Press 2020 Article PeerReviewed application/pdf en http://repo.uum.edu.my/27453/1/IJBF%2015%201%202020%201%2019.pdf Ong, Chui Zi and Mohd Rashid, Rasidah and Taufil Mohd, Kamarun Nisham (2020) Leverage and IPO pricing: Evidence from Malaysia. International Journal of Banking and Finance, 15 (1). pp. 1-19. ISSN 1675-722X http://doi.org/10.32890/ijbf2020.15.1.9929 doi:10.32890/ijbf2020.15.1.9929
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 HG Finance
spellingShingle HG Finance
Ong, Chui Zi
Mohd Rashid, Rasidah
Taufil Mohd, Kamarun Nisham
Leverage and IPO pricing: 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 Ong, Chui Zi
Mohd Rashid, Rasidah
Taufil Mohd, Kamarun Nisham
author_facet Ong, Chui Zi
Mohd Rashid, Rasidah
Taufil Mohd, Kamarun Nisham
author_sort Ong, Chui Zi
title Leverage and IPO pricing: Evidence from Malaysia
title_short Leverage and IPO pricing: Evidence from Malaysia
title_full Leverage and IPO pricing: Evidence from Malaysia
title_fullStr Leverage and IPO pricing: Evidence from Malaysia
title_full_unstemmed Leverage and IPO pricing: Evidence from Malaysia
title_sort leverage and ipo pricing: evidence from malaysia
publisher UUM Press
publishDate 2020
url http://repo.uum.edu.my/27453/1/IJBF%2015%201%202020%201%2019.pdf
http://repo.uum.edu.my/27453/
http://doi.org/10.32890/ijbf2020.15.1.9929
_version_ 1677783835258912768
score 13.211869

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