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Explaining underpricing of IPOs in frontier markets: Evidence from the Nigeria Stock Exchange

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  • Adjasi, Charles K.D.
  • Osei, Kofi A.
  • Fiawoyife, Eme U.

Abstract

The paper provides empirical analyses of IPO underpricing on the Nigerian Stock Exchange, from the period 1990 to 2006. The results indicate an average abnormal initial day returns of 43.1%. There is evidence of long-run underperformance of 0.6%. Results from our regression model explaining initial abnormal returns for the IPOs of Nigeria show that size of firm and audit quality are important variables affecting underpricing. The results also show the presence of a non-linear relationship between the offer price and underpricing.

Suggested Citation

  • Adjasi, Charles K.D. & Osei, Kofi A. & Fiawoyife, Eme U., 2011. "Explaining underpricing of IPOs in frontier markets: Evidence from the Nigeria Stock Exchange," Research in International Business and Finance, Elsevier, vol. 25(3), pages 255-265, September.
    • Handle: RePEc:eee:riibaf:v:25:y:2011:i:3:p:255-265
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    References listed on IDEAS

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    4. Muhammad Zubair Mumtaz & Zachary A. Smith & Ather Maqsood Ahmed, 2016. "An examination of short-run performance of IPOs using Extreme Bounds Analysis," Estudios de Economia, University of Chile, Department of Economics, vol. 43(1 Year 20), pages 71-95, June.
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    6. Hearn, Bruce, 2013. "Size and liquidity effects in Nigeria: an industrial sector study," MPRA Paper 47975, University Library of Munich, Germany.
    7. Rathnayake, Dilesha Nawadali & Louembé, Pierre Axel & Kassi, Diby François & Sun, Gang & Ning, Ding, 2019. "Are IPOs underpriced or overpriced? Evidence from an emerging market," Research in International Business and Finance, Elsevier, vol. 50(C), pages 171-190.

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