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Empirical examinations of initial public offering (IPO) initial returns often rely heavily on linear regression models. However, these models can prove inefficient owing to their susceptibility to outliers, a common occurrence in IPO data. This study introduces a machine learning method, known as random forest, to address issues that linear regression may struggle to resolve.

The study’s sample comprises 352 fixed-priced IPOs from the year 2004 until 2021. A unique aspect of this research is its application of the random forest method. The accuracy of random forest in comparison to other methods is evaluated. The findings indicate that the random forest model significantly outperforms other methods in all of the evaluated aspects.

The variable importance measure indicates that investors’ demand, divergence of opinion among investors and offer price are the most crucial predictors of IPO initial returns. These determinants hold particular significance due to the widespread use of the fixed-price method in Malaysia, as this method amplifies the information asymmetry in the IPO market.

To the best of the authors’ knowledge, this study is among the pioneering works in Malaysian literature to apply the random forest method to address the constraints of conventional linear regression models. This is achieved by considering a more extensive array of factors and acknowledging the influence of outliers. Additionally, this study adds value to Malaysian literature by ranking and identifying the ex-ante information that best signals the issuing firm’s quality. This contribution facilitates prospective investors’ decision-making processes and provides issuing firms with effective means to communicate their value and quality to the IPO market.

This study aims to examine the potential of Sharia status as ex ante information to signal the quality of an issuing firm by improving the decision-making process of potential investors when assessing initial public offerings (IPOs) in an environment where information asymmetry is pronounced. Potential investors face challenges in evaluating and determining the true value of IPO issues, which inherently influences their decision-making. Consequently, this results in pronounced price fluctuations in IPO shares, leading to higher underpricing.

This study uses a sample of 350 IPOs listed on the Kuala Lumpur Stock Exchange (KLSE) between 2004 and 2021 to examine the signaling role of Sharia-compliance status. A three-model approach is used to ensure that the study's objectives are met. The first model investigates the effect of Sharia status on underpricing to determine whether the main beneficiary of such a signal is the investor or the issuer. The second model examines the effect of Sharia status on investor demand to determine if such a signal influences prospective investors' investment decision-making processes. The third model inspects the effect of Sharia status on investor divergence of beliefs to measure the signal's ability to reduce information asymmetry within the Malaysian IPO market.

The Malaysian IPO market relies heavily on the fixed-price mechanism, which exacerbates high information asymmetry, affecting potential investors' behavior, asset price formation and return generation on the first day of listing. The study results indicate that Sharia status does not have any signaling role in the Malaysian IPO market. This is because investors in the Malaysian market are driven by ex ante information that helps unveil relevant information that leads to capital gains. Furthermore, most new issues in the Malaysian IPO market fall under Sharia status, diluting the relevance of such information for prospective investors in determining profitable investments.

The findings highlight the challenges faced by issuing firms in estimating market demand due to limited premarket insights and the difficulties prospective investors face in identifying the quality of issuing firms. Efforts to provide more information on investor demand can reduce uncertainty and facilitate more informed decision-making.

This research stands as one of the pioneering efforts to provide an empirical explanation of the potential signaling influence of Sharia status in an emerging IPO market.

The present study aims to identify how firms positioned their corporate reputation (i.e. impressiveness vs respectability) in their initial public offering (IPO) communication based on the impression formation model. Further, the study examined whether this presentation of corporate reputation was related to IPO success (i.e. stock price and volume of trading).

The present study analyzed 248 IPO prospectuses that were submitted to the major US stock markets. Specifically, various substantive and symbolic information and cues in IPO prospectuses were content analyzed.

The results suggest that bigger (in terms of revenue) IPO companies featured more “impressiveness” in their IPO prospectus, leading to greater IPO success. Bigger (in terms of both revenue and number of employees) IPO companies featured more “respectability” impressions in the IPO prospectus, although they did not achieve direct IPO success on the first day of IPO. Different types of industry used different information cues to feature “impressiveness” and/or “respectability,” suggesting that different types of firms view different cues to be important to IPO communication.

The results also suggest some practical guidelines for the strategic use of contents, tables and illustrations. Using more charts, tables and illustrations in IPO prospectus summaries was associated with a higher volume of trading on the first day. The more illustrations included in the IPO prospectus summaries, the less investors were willing to pay for initial stock prices.

IPO communication is a generally understudied area in corporate communication and strategic communication scholarship. The results should help to explain which communicative aspects and PR strategies effectively manage the firm’s impression to maximize the chances of an IPO success as well as initially build the financial reputation of a company. By doing so, the findings contribute to the broader advancement of financial communication within the strategic communications domain.

This study aims to examine the impact of the International Financial Reporting Standards (IFRS) mandate and differences in national institutional quality on the underpricing of Initial Public Offering (IPO) companies.

Multiple Difference-in-Differences (DiD) ordinary least squares estimations were conducted for 100 corporations listed on the Saudi Arabian stock market using country-level institutional quality data from 2005 to 2017.

IFRS requirements and improvements in institutional quality have a combined effect on minimizing IPO underpricing. The analysis of the combined impact of IFRS requirements and differences in transparency revealed that IPO vendors leave $5 on average for IPO investors to cash out post the IFRS mandate, compared to $29 previously. Thus, IFRS serves as a quality certification instrument that alleviates IPO investors’ ex ante uncertainties, even in nations with undeveloped institutions.

The findings may be beneficial to researchers and policymakers. The results suggest that institutional quality enhancements and obligatory IFRS implementation highlight IFRS’s synergistic influence on the IPO market. While European harmonization efforts drove the adoption of IFRS in Europe in 2005, Saudi Arabia’s adoption of IFRS is not being driven by such initiatives (Daske et al., 2008; Persakis and Iatridis 2017). In reality, when IFRS was officially imposed in Saudi Arabia in 2008, it, like many other emerging market nations, made considerable reforms to its formal institutions. However, research on the combined impact of IFRS and disparities in institutional quality in emerging IPO markets remains sparse. Emerging markets represent more than half of economies that use IFRS. Therefore, to the best of the authors’ knowledge, this study is the first to conduct an empirical investigation to identify this combined effect in emerging countries using the DiD analytical technique. Equity market legislators remain concerned regarding IPO underpricing, as it has a detrimental influence on economic growth (Bova and Pereira, 2012; Jamaani and Ahmed, 2021; Mehmood et al., 2021). Depending on the degree of information asymmetry in national stock markets, underpricing costs increase the cost of going public for entrepreneurs. Consequently, prospective private firms are discouraged from accessing equity financing through the stock markets. This is likely to impede private sector development plans, causing a negative effect on economic growth.

Emerging countries represent over 50% of the IFRS mandating economies. However, there is insufficient research on the combined effect of IFRS requirements and improvements in institutional quality in developing IPO markets. To the best of the authors’ knowledge, this study is the first empirical attempt to identify this combined effect in one of the largest developing countries. The results may aid academics and policymakers in better understanding the interaction between these two variables.

A critical factor to the success of IPOs is investor demand, which can be observed from the IPO subscription pattern. Therefore, the objective of this study is to review the studies on the demand of IPOs, including empirical and theoretical literature, due to the substantial growth of IPOs over the last two decades.

This study extracted secondary data regarding IPO demand published from 1988 to 2022 from the Scopus database. We conducted a meta-literature review for qualitative and quantitative methods on the resulting 284 articles using citation analysis (Harzing’s Publish or Perish and VOS viewer software) and content analysis.

The findings revealed significant elements of the literature, including countries, institutions, journals, authors, articles and topics. Based on the IPO literature review and analyses, this paper developed future research questions to facilitate an extension of the research. Additionally, this paper developed a dual perspective of the present state of IPO research. First, it asserts that the demand for IPOs is not limited to certain countries, jurisdictions or vintages. Second, there are very few studies on demand for IPOs available despite IPOs’ economic worth.

To the best of the authors’ knowledge, this is the first study of its kind to present an empirical evaluation of demand for IPOs using inclusive mapping.

This study aims to examine the impact of disclosure on the unsolved initial public offering (IPO) puzzle. For this purpose, the authors analyzed the impact of the primary uses of the proceeds disclosed in a firm's IPO prospectus on underpricing, prelisting performance, postlisting underperformance and operating performance.

This study uses Indian public firms that went public between March 31, 2010, and March 31, 2020. A multivariate regression technique was used to study the impact of the primary uses of proceeds on underpricing, prelisting performance and postlisting underperformance, whereas a quantile regression technique was used to study their impact on operating performance.

The authors found that the primary use of proceeds disclosure helps predict underpricing and returns to the investor only until day 60 postlisting; beyond that, they provide no further insights into the firm's performance. Firms with lower and average operating performance should not state the general corporate purposes and payment on borrowings, respectively, as their primary use of proceeds, as it leads to a decline in their operating performance.

Results might suffer from the potential endogeneity problem due to selection bias. This research focuses on India only, which makes generalization of results for other economies difficult. Future research may extend the post-IPO period and include more developing economies. Furthermore, future studies can draw comparisons between developed and developing nations' disclosures of using proceeds.

This study will help the firms going public in India better disclose the use of proceeds based on their characteristics. Stating future acquisitions, payments on borrowings and working capital reduces the uncertainty, and therefore, these are feasible avenues for investing proceeds raised through IPO.

The authors used ten categories for the primary use of proceeds disclosure, whereas previous studies have used only five to six categories. To the best of the authors’ knowledge, this study was the first to use underpricing, postlisting performance and operating performance in a single study. These measures gave a more holistic view of the use of proceeds disclosure.

This study investigates the relationship between board gender diversity (BGD) and the time to Initial Public Offering (IPO), which stands as an entrepreneurially risky choice, particularly challenging in family firms. We also investigate the moderating role of family ownership dispersion (FOD).

We draw on an integrated theoretical framework bringing together the upper echelons theory and the socio-emotional wealth (SEW) perspective and on hand-collected data on a sample of Italian family IPOs that occurred in the period 2000–2020. We employ ordinary least squares (OLS) regression and alternative model estimations to test our hypotheses.

BGD positively affects the time to IPO, thus, it increases the time required to go public. FOD negatively moderates this relationship. Our findings remain robust with different measures for BGD, FOD, and family business definition as well as with different econometric models.

The article develops literature on family firms and IPO and it enriches the academic debate about gender and IPOs in family firms. It adds to studies addressing the determinants of the time to IPO by incorporating gender diversity and the FOD into the discussion. Finally, it contributes to research on women and outcomes in family firms.

This study aims to inform prospective listing firms, investors and regulators of the unique drivers of Chinese initial public offering (IPO) pricing on the Hong Kong Exchange.

Using a hand-collected IPO dataset, we investigate whether information uncertainty or investor exuberance drives underpricing and Chinese IPOs’ performance from 2002 to 2015, including 114 state-owned enterprises (SOEs).

Contrasting with the “listing bubble” in the China domestic stock market, generated by the overoptimism of retail investors, we highlight a “placing bubble” among Chinese firms listed in Hong Kong. This is driven by institutional investors’ buoyant demand for Chinese IPO shares, particularly those of SOEs. Chinese listing firms employ discreet earnings management strategies with their working capital accounts to smooth pre-IPO earnings, which becomes apparent to the market only in the long term.

This study is the first to examine the pricing of sought-after Chinese IPOs among international investors, who face various restrictions when investing in the Chinese domestic stock market. Additionally, it is the first study to measure earnings management using hand-collected pre-IPO data in IPO underpricing studies.

This study aims to identify mutually exclusive risk categories and determine whether these categories effectively capture the potential impact of risk disclosures on the initial returns of initial public offerings (IPOs) in the financial and non-financial sectors.

Data were collected from 131 Indian IPO prospectuses (104 non-financial and 27 financial) issued between 2015 and 2021. Content analysis was performed to identify mutually exclusive risk categories, and the effects of these categories on initial IPO returns were assessed by regression analysis

The findings revealed that risk factor disclosures have a significant impact on underpricing, but not all risk factors are relevant. In the current study, in the financial sector, IPO underpricing was mostly driven by technological and competitive risk factors. In the non-financial sector, underpricing was predominantly influenced by operating risk and compliance risk factors.

The limitations of this study include the use of sentence-based context analysis, which does not assess the quality of risk disclosures. The statistical data reduction technique used to generate mutually exclusive risk categories may also be a limitation.

This research has the potential to assist companies in standardizing the disclosure of risks within IPO prospectuses. The insights gained can inform market regulators in designing policies aimed at aiding investors in formulating investment strategies, ultimately enhancing transparency and clarity regarding information disclosure. Moreover, the findings offer valuable guidance to investors in selecting IPOs aligned with their risk tolerance levels.

From a societal perspective, this study represents advancements by guiding regulators towards developing and regulating standardized, mutually exclusive risk factors. Such measures can aid investors in enhancing their decision-making perspectives regarding IPOs, promoting a more informed and confident investment environment.

This study is a pioneering attempt to address knowledge gaps by identifying distinct categories of risk disclosures in IPO prospectuses and examining their potential influence on IPO underpricing in the financial and non-financial sectors in India.

The purpose of this paper is to explore the connection between initial public offerings (IPOs) and knowledge management (KM). Specifically, the manuscript critically examines the literature on IPOs and KM underlying how KM practices influence the IPO processes of companies.

The authors employ a systematic literature review methodology to identify and thematically investigate 21 articles published in journals by the Chartered Association of Business Schools (ranked 2, 3, 4, 4*).

This research sheds new light on the relevance of KM practices in the context of IPOs. Specifically, the authors identify four crucial aspects concerning companies that opt for an IPO: (i) reasons for IPO and the role of KM; (ii) IPO process and the role of KM; (iii) underpricing and the role of KM; (iv) post-IPO and the role of KM.

This paper shows the pivotal role of effective KM strategies in fostering a successful IPO. Additionally, it provides practical recommendations for companies seeking to effectively harness their intellectual assets during the IPO process.