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Macroeconomic Factors and Initial Public Offerings (IPOs) in Malaysia

Author

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  • Rashid Ameer

    (Accounting Research Institute, Universiti Teknologi Mara, Shah Alam 40450 Selangor, Malaysia)

Abstract

This paper seeks to address the question of whether local macroeconomic variables have any influence on the numbers of IPOs in an emerging market, Malaysia over the period of 1990 to 2008. The evidence of a significant negative relationship between interest rate and the numbers of IPOs, and a significant positive relationship between industrial production and the numbers of IPOs are found. A long-run equilibrium relationship between interest rate, industrial production and numbers of IPOs using cointegration and Vector Error Correction models is found. The impact of interest rate on the numbers of IPO numbers is far greater in the cold IPO regime than during IPO hot regime using Markov regime switching regression model are also found. The empirical finding seems to detect direction of the IPO market reasonably. The results show that hot IPO market regime evolves when the investors begin experiencing extremely high initial returns and their expectation about the future interest rate provide an indication about entrepreneur's/manager's willingness to move to the IPO market. On the other hand, when a government pursues monetary tightening, investors believe that future earnings are expected to shrink due to higher interest rate in future, and valuation of shares would be affected due to lower dividend yield, it keeps investors away from the IPO markets causing cold IPO market.

Suggested Citation

  • Rashid Ameer, 2012. "Macroeconomic Factors and Initial Public Offerings (IPOs) in Malaysia," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 8(1), pages 41-67.
    • Handle: RePEc:usm:journl:aamjaf00801_41-67
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    Citations

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    Cited by:

    1. Vikram Ghandeeswaran Narayanan & Gopakumar Kattiparambil Unni, 2021. "Determinants of Volume of IPOs in India: A Case of Count Model with Overdispersion," Economic Research Guardian, Weissberg Publishing, vol. 11(1), pages 27-46, June.
    2. Waqas Mehmood & Rasidah Mohd-Rashid & Abd Halim Ahmad, 2023. "The Variability of IPO Issuance: Evidence from Pakistan Stock Exchange," Global Business Review, International Management Institute, vol. 24(5), pages 1025-1040, October.
    3. Meluzin, Tomas & Zinecker, Marek & Lapinska, Justyna, 2014. "Determinants of Initial Public Offerings: The Case of Poland || Factores determinantes de una opción pública de venta (OPV): el caso de Polonia," Revista de Métodos Cuantitativos para la Economía y la Empresa = Journal of Quantitative Methods for Economics and Business Administration, Universidad Pablo de Olavide, Department of Quantitative Methods for Economics and Business Administration, vol. 18(1), pages 5-17, December.
    4. D. Balios & N. Daskalakis & N. Eriotis & D. Vasiliou, 2016. "SMEs capital structure determinants during severe economic crisis: The case of Greece," Cogent Economics & Finance, Taylor & Francis Journals, vol. 4(1), pages 1145535-114, December.
    5. L. Hedhili Zaier & A. Kammoun Abdelmoula, 2014. "Hot and Cold Cycles for African Emerging Share IPO Market Evidence from Tunisia," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(11), pages 1691-1704, November.
    6. Sheena Chhabra & Ravi Kiran, 2022. "Impact of information on winners' curse and long run performance of initial public offerings," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 975-992, January.
    7. Carmelo Intrisano & Anna Paola Micheli & Anna Maria Calce, 2020. "Does Stock Listing Affect Value Creation and Profitability? Evidence from European Listed and Unlisted Companies," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 12(11), pages 130-130, November.
    8. Eliana Angelini & Matteo Foglia, 2018. "The Relationship Between IPO and Macroeconomics Factors: an Empirical Analysis from UK Market," Annals of Economics and Finance, Society for AEF, vol. 19(1), pages 319-336, May.

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