Open AccessDeterminants of underpricing initial public offerings (IPOs) of BRICS companies
Author(s) -
Afik Gasymov,
Светлана Геннадьевна Макарова
Publication year - 2021
Publication title -
brics journal of economics
Language(s) - English
Resource type - Journals
eISSN - 2712-7702
pISSN - 2712-7508
DOI - 10.38050/2712-7508-2021-3-5
Subject(s) - initial public offering , underwriting , reputation , business , monetary economics , accounting , audit , public offering , sample (material) , emerging markets , empirical evidence , economics , finance , social science , philosophy , chemistry , chromatography , epistemology , sociology
The purpose of this article is to identify the nature of the influence of crucial factors on the short-term underpricing of initial public offerings of common stocks of companies in the BRICS countries. Based on a sample of 1,141 companies from the BRICS countries that conducted IPOs (using Bloomberg and World Bank databases), we tested the influence of decisive factors on the underpricing of the shares of these companies. The empirical study is based on testing OLS models for different periods: for the period 2001–2018 and separately for the periods 2001–2008 and 2010–2018. The study shows that, firstly, with an increase in the volume of the placement of shares, their underestimation in an IPO decreases. In addition, having an auditor from the Big Four also reduces the underestimation of shares. Secondly, we revealed that the underpricing of shares in the course of the IPO increased with GDP growth. Besides, if companies place their shares on a foreign exchange, the underestimation of their shares increases. At the same time, such IPO parameters as the number of underwriters, the reputation of underwriters, and the deviation of the offer price from the middle of the price range duringthe placement period do not affect the underestimation of shares for companies from the BRICS countries. Taking into account the results of an empirical study, the article formulates recommendations for improving the efficiency of initial public offerings for companies from the BRICS countries.