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Article
Publication date: 7 August 2017

Andriansyah Andriansyah

The purpose of this paper is to investigate the real effects of primary and secondary equity markets on the post-issue operating performance of initial public offering (IPO) firms.

Abstract

Purpose

The purpose of this paper is to investigate the real effects of primary and secondary equity markets on the post-issue operating performance of initial public offering (IPO) firms.

Design/methodology/approach

The author utilizes the intended use of proceeds as a proxy variable for the primary market and the investment-to-price sensitivity and the informativeness of stock prices as alternative proxy variables for the secondary market. The compositional data, and non-parametric quantile regressions which are more robust to outliers than standard least square regressions, are employed for Indonesian equity market over the period of 1999-2013.

Findings

While confirming that firm operating performance can be explained by the firm’s motivation to go public, the author also shows that the operating performance is positively affected by investment-to-price sensitivity and negatively affected by stock price informativeness. The stock prices affect investment decisions by the way that the more liquid a stock is, the more informative its price is, and the more relevant stock prices are in investment decisions. These findings still hold after controlling for ownership structure.

Originality/value

Departing from the existing literature, the author investigates the role of primary and secondary equity markets for firm performance in an integrated framework because both markets interact closely in reality. The author shows that public listed firms can benefit both from the capital-raising function of the primary market and from the informational role of the stock prices of the secondary market. A measure of stock price informativeness, 1−R2, however, must be understood in the context of thin trading in the sense that the level of liquidity affects the level of stock price informativeness.

Details

International Journal of Managerial Finance, vol. 13 no. 4
Type: Research Article
ISSN: 1743-9132

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Article
Publication date: 4 March 2019

Andriansyah Andriansyah and George Messinis

The purpose of this paper is to develop a new framework to test the hypothesis that portfolio model predicts a negative correlation between stock prices and exchange rates…

Abstract

Purpose

The purpose of this paper is to develop a new framework to test the hypothesis that portfolio model predicts a negative correlation between stock prices and exchange rates in a trivariate transmission channel for foreign portfolio equity investment.

Design/methodology/approach

This paper utilizes panel data for eight economies to extend the Dumitrescu and Hurlin (2012) Granger non-causality test of heterogeneous panels to a trivariate model by integrating the Toda and Yamamoto (1995) approach to Granger causality.

Findings

The evidence suggests that stock prices Granger-cause exchange rates and portfolio equity flows Granger-cause exchange rates. However, the overall panel evidence casts doubt on the explicit trivariate model of portfolio balance model. The study shows that Indonesia may be the only case where stock prices affect exchange rates through portfolio equity flows.

Research limitations/implications

The proposed test does not account for potential asymmetries or structural shifts associated with the crisis period. To isolate the impact of the Asian Financial crisis, this paper rather splits the sample period into two sub-periods: pre- and post-crises. The sample period and countries are also limited due to the use of the balance of payment statistics.

Practical implications

The study casts doubt on the maintained hypothesis of a trivariate transmission channel, as posited by the portfolio model. Policy makers of an economy may integrate capital market and fiscal policies in order to maintain stable exchange rate.

Originality/value

This paper integrates a portfolio equity inflow variable into a single framework with stock price and exchange rate variables. It extends the Dumitrescu and Hurlin’s (2012) bivariate stationary Granger non-causality test in heterogeneous panels to a trivariate setting in the framework of Toda and Yamamoto (1995).

Details

Journal of Economic Studies, vol. 46 no. 2
Type: Research Article
ISSN: 0144-3585

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Article
Publication date: 1 October 2018

Said Musnadi, Faisal and M. Shabri Abd. Majid

This purpose of this study is to empirically investigate the investors overreaction and underreaction behaviours across the sectoral stock indices in the Indonesian stock market.

Abstract

Purpose

This purpose of this study is to empirically investigate the investors overreaction and underreaction behaviours across the sectoral stock indices in the Indonesian stock market.

Design/methodology/approach

Nine weekly sectoral stock indices, comprising agriculture; mining; basic industry and chemicals; miscellaneous industry; consumer goods industry; property and real estate; infrastructure, utilities and transportation; finance; and trade, service and investment for the period 2009-2012 were analysed using the paired dependent sample t-test. To provide more insightful empirical evidence, the presence of market anomaly of investor’s overreaction and underreaction was examined on five observations with different vulnerable times.

Findings

The study documented that the overreaction anomaly was present among the winner portfolios in the entire sectoral indices. With the exception of the sectoral index of basic industry and chemicals on the loser portfolio, the study documented the presence of underreaction anomaly among all other sectoral indices in Indonesia. These findings implied that the investors might be able to gain significant profits investing their monies in the sectoral stock market in Indonesia by implementing the contrarian strategy.

Originality/value

Originality in this paper lies in the discussion of overreaction of investors in Indonesia where the stock market has great potential and has different characteristics and different problems from other regions.

Details

International Journal of Ethics and Systems, vol. 34 no. 4
Type: Research Article
ISSN: 0828-8666

Keywords

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Article
Publication date: 30 August 2019

Sung Gyun Mun and SooCheong (Shawn) Jang

This study aims to identify why restaurant firms go public (IPO) despite high financing costs and which factors make firms stay public for the long term after an IPO…

Abstract

Purpose

This study aims to identify why restaurant firms go public (IPO) despite high financing costs and which factors make firms stay public for the long term after an IPO. Also, this study aimed to link and compare restaurant firms’ pre- and post-IPO accounting information and how IPO proceeds were used.

Design/methodology/approach

This study used random-effects regression analysis with a number of dependent variables for a sample of 1,347 unbalanced panel data. In addition, logistic regression analyses were used to identify why restaurant firms were delisted within short periods after going public.

Findings

First, rebalancing financial structures was the most important reason for IPOs, whereas financing future growth was only a minor motivation. Second, post-IPO performance significantly differed between restaurant firms based on their pre-IPO financial conditions, as well as how they used IPO proceeds. Third, restaurant firms with low profitability, inefficient non-operating expenses and difficulties in generating revenue increased their financial burdens, which ultimately caused restaurant firms to be delisted within a short period after an IPO. Furthermore, the reasons for merging included cash shortages, large short-term liabilities and increased major operating expenses, together with increases in capital expenditures.

Originality/value

This study is unique, in that it explains the relationships between motivations for going public and post-IPO performances by directly linking the usages of IPO proceeds with firms’ operational performances. To the best of the authors’ knowledge, this study is the first to examine the effects of IPOs on restaurant firms’ operational, non-operational, investment and financial activities on firms’ performances.

Details

International Journal of Contemporary Hospitality Management, vol. 31 no. 9
Type: Research Article
ISSN: 0959-6119

Keywords

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Book part
Publication date: 9 March 2021

Hasan Dinçer, Serhat Yüksel and Gülsüm Sena Uluer

The aim of the study is to evaluate role of trade war between the United States and China on oil price. For this purpose, global oil price and US trade balance with China…

Abstract

The aim of the study is to evaluate role of trade war between the United States and China on oil price. For this purpose, global oil price and US trade balance with China are selected as variables. In addition to this issue, monthly data of these variables for the periods between 1990 and 2019 are taken into consideration. In the evaluation process, both Engle–Granger cointegration and Toda–Yamamoto causality analysis are considered. The results of Engle–Granger cointegration analysis indicates that there is a ­relationship between trade war and oil prices. Nevertheless, according to the results of Toda–Yamamoto causality analysis, it is identified that trade war does not cause oil prices. While looking at these results, it is determined that trade war between the United States and China has an influence on the oil price changes. However, it is also understood that it is not the main factor of this volatility. Thus, it is recommended that in order to identify the main indicator of the oil price volatility, some different factors should also be taken into consideration.

Details

Global Tariff War: Economic, Political and Social Implications
Type: Book
ISBN: 978-1-80071-314-7

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Article
Publication date: 14 May 2019

Dominika Maison, Marta Marchlewska, Rizqy Amelia Zein, Dewi Syarifah and Herison Purba

The purpose of this paper is to investigate the influence of the halal label on product perceptions among Muslims high (vs low) in the centrality of their religion.

Abstract

Purpose

The purpose of this paper is to investigate the influence of the halal label on product perceptions among Muslims high (vs low) in the centrality of their religion.

Design/methodology/approach

It was hypothesized that a halal label would predict positive product perceptions, especially among those Muslims who scored high in the Centrality of Religiosity Scale (CRS). The study was conducted among 187 Muslims in Indonesia, a country in which Islam is the dominant religion. We used an experimental design where two products (cake and energy drink), with (n = 85) or without (n = 102) the halal label (depending on the experimental condition), were displayed. The participants were randomly assigned to the research conditions. Following product exposure, the participants evaluated products on perception scales (e.g. tasty, healthy). Finally, the centrality of religiosity (moderator variable) was measured.

Findings

The results of the analysis showed that the halal label increased positive product perceptions among those Muslims who scored high in the CRS. A similar pattern of results was obtained for both products (cake and energy drink), though the described effect was even more pronounced in the case of the energy drink.

Originality/value

Results shed light on the role of religiosity in consumption, especially in consumers’ responses to the halal label.

Details

Journal of Islamic Marketing, vol. 10 no. 3
Type: Research Article
ISSN: 1759-0833

Keywords

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Article
Publication date: 5 July 2021

Waqas Mehmood, Rasidah Mohd-Rashid, Ahmad Hakimi Tajuddin and Hassan Mujtaba Nawaz Saleem

This study aims to investigate the effect of Shariah-compliant status and Shariah regulation on initial public offering (IPO) underpricing in Pakistan.

Abstract

Purpose

This study aims to investigate the effect of Shariah-compliant status and Shariah regulation on initial public offering (IPO) underpricing in Pakistan.

Design/methodology/approach

Besides the ordinary least square’s method, this study used quantile least squares as a robust approach and stepwise regression for further analysis to investigate the underpricing phenomenon in Pakistan. Data of 84 IPOs listed on Pakistan Stock Exchange from January 2000 to December 2018 were collected to determine the impact of Shariah-compliant status and Shariah regulation on IPO underpricing.

Findings

Results of the study show that Shariah-compliant status has a negative relationship but Shariah regulation has a positive relationship with IPO underpricing. Hence, it is contended that Shariah-compliant firms have lower asset volatility and uncertainty than non-Shariah-compliant firms because of less information asymmetry, resulting in lower underpricing. These Shariah-compliant firms provide signals of high-quality IPOs as they must comply with the strict guidelines issued by the Securities Exchange Commission of Pakistan in addition to being considered as amicable by investors. Further, this study suggests that investors are more attracted to Shariah-compliant firms than non-Shariah-compliant ones.

Research limitations/implications

This study’s offers limited consideration of nonfinancial and financial characteristics that could influence the decision of investors to subscribe to IPOs. Besides, future studies could consider the screening benchmarks; for instance, debt and cash may explain the intensity of IPO initial return in Pakistan.

Originality/value

The present work empirically investigated the influence of Shariah-compliant status and Shariah regulation on IPO underpricing in Pakistan’s IPO market, which has been scarcely covered in the existing literature.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1753-8394

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Article
Publication date: 29 April 2021

Waqas Mehmood, Rasidah Mohd-Rashid, Abd Halim Ahmad and Ahmad Hakimi Tajuddin

The present study investigated the influence of country-level institutional quality on IPO initial return using World Bank Governance indices.

Abstract

Purpose

The present study investigated the influence of country-level institutional quality on IPO initial return using World Bank Governance indices.

Design/methodology/approach

This study analysed 84 IPOs listed on Pakistan Stock Exchange between 2000 and 2017 using cross-sectional data. The impact of country-level institutional quality on IPO initial returns was examined using ordinary least square, robust least square, stepwise least square and quantile regression.

Findings

Empirically, the values of political stability, government effectiveness and regulatory quality were positively significant, whereas rule of law and control of corruption were negatively significant in explaining the intensity of IPO initial return. The results also show the presence of significant risk in the market. Hence, investors were compensated with higher initial returns for weak country-level institutional quality. The results also reveal that improving country-level institutional quality would improve the financial market transparency, thereby reducing IPO initial returns.

Originality/value

No studies have been conducted regarding the influence of country-level institutional quality on IPO initial return in Pakistan. This study is a pioneering study that seeks to give insights into the link between these variables in the context of Pakistan.

Details

South Asian Journal of Business Studies, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2398-628X

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Article
Publication date: 3 December 2020

Nurwati A. Ahmad-Zaluki and Bazeet Olayemi Badru

This study aims to investigate the effects of the intended use of initial public offerings (IPO) proceeds that is disclosed in the prospectus on IPO initial returns.

Abstract

Purpose

This study aims to investigate the effects of the intended use of initial public offerings (IPO) proceeds that is disclosed in the prospectus on IPO initial returns.

Design/methodology/approach

A sample of IPOs listed on Bursa Malaysia from 2005 to 2015 is used. The intended use of IPO proceeds is categorised into three uses, namely, growth opportunities, debt repayment and working capital. In addition to ordinary least squares regression, the study applies a more sophisticated and robust approach using the quantile regression technique.

Findings

The results show that the intended use of IPO proceeds for growth opportunities and working capital is positively associated with IPO initial returns, whereas debt repayment is negatively associated with IPO initial returns. When the intended use of IPO proceeds for growth opportunities is further expanded into capital expenditure (CAPEX) and research and development (R&D), the intended use of IPO proceeds for CAPEX is positively associated with IPO initial returns, whereas R&D is negatively associated with IPO initial returns.

Research limitations/implications

These findings suggest that intended use of IPO proceeds provides useful information about IPO initial returns and investors can use this information as guidance to make informed decisions. In addition, regulatory authorities should pay close attention to the amount allocated to each intended use of IPO proceeds as this may play a critical role in the success of a company and the economy.

Originality/value

This study gives new empirical evidence on the desire and motivations of IPO and the usefulness of designated use of IPO proceeds disclosed in the prospectus in explaining IPO initial returns.

Details

Journal of Financial Reporting and Accounting, vol. 19 no. 2
Type: Research Article
ISSN: 1985-2517

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Article
Publication date: 5 March 2020

Waqas Mehmood, Rasidah Mohd-Rashid and Abd Halim Ahmad

The purpose of this paper is to examine the effects of pricing mechanism on initial public offerings (IPOs) oversubscription in Pakistan.

Abstract

Purpose

The purpose of this paper is to examine the effects of pricing mechanism on initial public offerings (IPOs) oversubscription in Pakistan.

Design/methodology/approach

This study used cross-sectional data to analyse 85 listed IPOs on the Pakistan stock exchange during the period of 2000-2017 to assess hypotheses related to influential determinants of IPO oversubscription. Accordingly, ordinary least square, robust regression and quantile regression approaches were applied in this study to evaluate the factors that influenced oversubscription.

Findings

The outcome displayed pricing mechanism is negatively significant with an oversubscription of IPOs. This indicates firms using the fixed-price mechanism signalled higher information asymmetry and uncertainty in their value. Thus, investors are aware that they will be offset with underpricing, and it is expected the demand will be higher for the particular IPOs.

Research limitations/implications

This study is entirely focused on the available information of prospectus that should not be ignored by potential investors at the time of subscription of IPO. Therefore, the study contributes to extending the available literature in signalling theory whereby issuers should consider using the book-building pricing mechanism in enhancing the efficiency of the IPO offer price during the listing.

Originality/value

This paper provides evidence for the determinants of the IPO oversubscription.

Details

Pacific Accounting Review, vol. 32 no. 2
Type: Research Article
ISSN: 0114-0582

Keywords

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