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Intellectual capital and subscription rate: an empirical investigation in the Indian initial public offering market

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  • Sukanya Wadhwa
  • Seshadev Sahoo

Abstract

Purpose - This study aims to investigate the impact of intellectual capital (IC) on investor demand (i.e. subscription rate). The rise of the knowledge economy motivates us to investigate how the value added by the IC of the issuing firms affects potential investors’ responses. Design/methodology/approach - This study investigates the impact of IC on initial public offering (IPO) subscription rates using 234 IPOs from March 31, 2010 to March 31, 2021. This study uses multivariate regression, including year and industry dummies, and conduct robustness tests with industry subsamples. Additionally, this paper uses an alternative demand proxy (i.e. listing day returns) and two-staged least squares to address endogeneity. Findings - This paper documents an inverse relationship between investor demand and human capital efficiency alongside a positive correlation between investor demand and structural capital efficiency. Additionally, IC efficiency positively affects listing day returns, with individual investor demand significantly driven by institutional investors. Originality/value - This study uses Pulic’s (2000) methodology for measuring IC and examines whether it reduces information asymmetry in the IPO market and encourages investors to subscribe to an issue. This study holds significant implications for IPO issuing firms, investors and regulators regarding the IC disclosure in the prospectus.

Suggested Citation

  • Sukanya Wadhwa & Seshadev Sahoo, 2024. "Intellectual capital and subscription rate: an empirical investigation in the Indian initial public offering market," Accounting Research Journal, Emerald Group Publishing Limited, vol. 37(3), pages 330-349, June.
    • Handle: RePEc:eme:arjpps:arj-10-2023-0284
    DOI: 10.1108/ARJ-10-2023-0284
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    More about this item

    Keywords

    Investor demand; Subscription rate; Intellectual capital; Initial public offerings; Human capital efficiency; Structural capital efficiency; G12; G41;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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