Under Pricing Anomaly – Empirical Evidence from Indian Capital Market

Abstract

In this paper, we examine the IPO anomaly "Under Pricing” for Indian Capital Market during the period of 2002-2012. Stepwise regression was carried out to find out the factors explaining under pricing. Results obtained in this study are a bit ahead of the earlier empirical findings in terms of adjusted R2. We found factors such as degree of over subscription, market rate of return, issue price and post issue promoters holding are significant and explaining 42.2% of under pricing. The shift in degree and factors explaining under pricing may be attributed to the change in regulatory and institutional environment of the Indian Capital Market. The findings of this paper may have strong implication for the policy makers, market intermediaries as well as retail investors.