IDEAS home Printed from https://ideas.repec.org/a/eme/rbfpps/rbf-04-2020-0078.html
   My bibliography  Save this article

Determinants of heterogeneity in investors' opinions on IPO valuation: evidence from the Pakistan stock market

Author

Listed:
  • Waqas Mehmood
  • Rasidah Mohd-Rashid
  • Norliza Che-Yahya
  • Chui Zi Ong

Abstract

Purpose - This study investigated the effect of pricing mechanism and oversubscription on the heterogeneity of investors' opinions on initial public offering (IPO) valuation. Design/methodology/approach - Besides the ordinary least square method, this study incorporated robust least square, stepwise least square and quantile regression methods to investigate the aftermarket behaviour of investors using the price range on the first day of trading of 82 IPOs listed on the Pakistan stock exchange. Findings - The aftermarket behaviour of investors was found to be significantly influenced by the pricing mechanism, oversubscription, financial leverage, political stability and the risk of IPO, whereas control of corruption showed an insignificant impact. Concurrently, the findings showed that pricing mechanism and oversubscription played a crucial role in determining the intensity of investors' heterogeneous opinions at high levels of significance. Originality/value - Pricing mechanism and oversubscription not only signal the quality of IPOs but also provide an important means for reducing the information asymmetry associated with new listings. Based on the literature review, it was found that both the pricing mechanism and oversubscription have yet to be explored in investigating the aftermarket behaviour of investors using the price range in the Pakistan IPO market. This study suggests that book building pricing mechanism and oversubscription are associated with lower heterogeneity in investors’ opinions at a high level of significance.

Suggested Citation

  • Waqas Mehmood & Rasidah Mohd-Rashid & Norliza Che-Yahya & Chui Zi Ong, 2020. "Determinants of heterogeneity in investors' opinions on IPO valuation: evidence from the Pakistan stock market," Review of Behavioral Finance, Emerald Group Publishing Limited, vol. 13(5), pages 631-646, August.
    • Handle: RePEc:eme:rbfpps:rbf-04-2020-0078
    DOI: 10.1108/RBF-04-2020-0078
    as

    Download full text from publisher

    File URL: https://www.emerald.com/insight/content/doi/10.1108/RBF-04-2020-0078/full/html?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://www.emerald.com/insight/content/doi/10.1108/RBF-04-2020-0078/full/pdf?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1108/RBF-04-2020-0078?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Dr. Aniruddha DAS & Dr. Amith Vikram MEGARAVALLI & Dr. A. Sarath BABU, 2023. "What drives the oversubscription of IPO’s: evidence from Indian Stock Market," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(4(637), W), pages 47-62, Winter.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:rbfpps:rbf-04-2020-0078. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Emerald Support (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.