TY - JOUR
T1 - Firm quality or market sentiment
T2 - what matters more for IPO investors?
AU - Neupane, Suman
AU - Paudyal, Krishna
AU - Thapa, Chandra
N1 - NOTICE: this is the author's version of a work that was accepted for publication in Journal of Banking and Finance. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Banking and Finance, [44, (07/2014)] doi:10.1016/j.jbankfin.2014.04.010
PY - 2014/7
Y1 - 2014/7
N2 - This paper investigates the investment decisions of IPO investors when equipped with information on both the quality of the firm and the market sentiment. Unique regulatory provisions allow IPO investors in India to have access to the independent assessment of firm quality and information on the participation of other investors, including institutional investors. At the same time, an active grey market reveals market sentiment before the application for subscription is closed. The results, which are robust to alternative model specifications, suggest that the institutional investors' decision is guided almost exclusively by firm quality while the retail investors' decision to participate in IPOs is strongly influenced by market sentiment, even in a highly transparent market where both sets of information are freely available.
AB - This paper investigates the investment decisions of IPO investors when equipped with information on both the quality of the firm and the market sentiment. Unique regulatory provisions allow IPO investors in India to have access to the independent assessment of firm quality and information on the participation of other investors, including institutional investors. At the same time, an active grey market reveals market sentiment before the application for subscription is closed. The results, which are robust to alternative model specifications, suggest that the institutional investors' decision is guided almost exclusively by firm quality while the retail investors' decision to participate in IPOs is strongly influenced by market sentiment, even in a highly transparent market where both sets of information are freely available.
KW - initial public offerings
KW - transparency
KW - IPO grade
KW - retail investors
KW - institutional investors
KW - grey market
UR - http://www.journals.elsevier.com/journal-of-banking-and-finance
U2 - 10.1016/j.jbankfin.2014.04.010
DO - 10.1016/j.jbankfin.2014.04.010
M3 - Article
SN - 0378-4266
VL - 44
SP - 207
EP - 218
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
ER -
