Acta Universitatis Danubius. Œconomica, Vol 10, No 4 (2014)

The Factors Affecting the Money Left on the Table by Pakistani IPO Issuers

Atif Kafayat


This study is about the level of under-pricing of 30 IPOs of eleven different sectors listed on Karachi Stock Exchange from the period 2006 to 2013. We also examined the factors that influence the money left on the table by IPO issuers in Pakistan. Like other countries, the under pricing was also found among the Pakistani IPOs. The sectors consist of Close Ended Mutual Fund, Commercial Banks, Modarabas, Investment Banks/Investment Companies, Textile Spinning, Miscellaneous, Chemicals, Engineering, Cement, Telecommunication and Power. The entire sample shows that market adjusted abnormal return of 68.22% is there in the sector of commercial bank, 14.88% in sector of Modarabas, 38.31% in investment banks and investment companies sector, 97.51% in Miscellaneous sector, 66.99% in Chemicals sectors, 143.66% in Engineering sector, 25.36% in Cement sector and 251.24% in power sector while investors have faced loss -21.45% in Close-End Mutual Funds sector, -32.89% in textile spinning sector and -19.84% in telecommunication sector. We have used the regression analysis to observe the level of under-pricing regarding eleven different sectors. Among the variables we use in our study ex-ante uncertainty and over-subscription variables showed significant effect while the other variables which include proportion of shares offered to general public, log of offer size and market volatility did not show great effect on the under-pricing.


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