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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 aims to investigate the impact of facial-based perceived trustworthiness on stock valuation, particularly, in the initial public offering (IPO). IPO settings provide the opportunity to investigate whether information asymmetry resulting from company newness in the market would influence the incorporation of soft information in the form of executive facial trustworthiness in stock valuation.

We use a recent machine learning algorithm to detect facial landmarks and then calculate a composite facial trustworthiness measure using several facial features that have previously been observed in neuroscience and psychological studies to be the most determining factor of perceived trustworthiness. We then regress the facial trustworthiness of IPO firm executives to IPO underpricing.

Utilizing machine learning algorithms, we find that the facial trustworthiness of the company executive negatively impacts the extent of IPO underpricing. This result implies that investors incorporate the facial trustworthiness of company executives into stock valuation. The IPO underpricing also shows that the cost of equity is higher when perceived trustworthiness is low. With regard to the higher information asymmetry in IPO transactions, such a negative impact implies the role of facial trustworthiness in alleviating information asymmetry.

This study provides evidence of the impact of top management personal characteristics on firms’ financial transactions in the Indonesian context. From the perspective of investors and other fund providers, this study shows evidence that heuristics still play an important role in financial decision-making. This is also an indication of investor reliance on soft information. Our research method also provides a new opportunity for the use of machine-learning algorithms in processing non-conventional types of data in finance research, which is still relatively rare in emerging markets like Indonesia. To the best of our knowledge, our study is the first to use personalized measures of trust generated through machine-learning algorithms in IPO settings in Indonesia.

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.

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.

Driven by the anticipated global stagflation, this straightforward yet novel study examines the cost of inflation as a macroeconomic factor by investigating its influence on stock market growth. Thus, this paper aims to examine the impact of inflation on the probability of initial public offering (IPO) withdrawal decision.

The paper employs a large dataset that covers the period January 1995–December 2019 and comprises 33,536 successful or withdrawn IPOs from 22 nations with various legal and cultural systems. This study applies a probit model utilizing version 15 of Stata statistical software.

This study finds that inflation is substantially and positively correlated with the likelihood of IPO withdrawal. Results of this study show that the IPO withdrawal decision increases up to 90% when the inflation rate climbs by 10%. Multiple robustness tests provide consistent findings.

This study's implications are important for researchers, investment banks, underwriters, issuers, regulators and stock exchanges. When processing IPO proposals, investment banks, underwriters and issuers must consider inflation projections to avoid negative effects, as demonstrated by the findings. In addition, regulators and stock exchanges must be aware of the detrimental impact of inflation on competitiveness in attracting new listings.

To the best of the authors’ knowledge, this study is the first to present convincing evidence of a major relationship between IPO withdrawal decision and inflation.

The purpose of this study is to extend the Fraud Diamond Theory to celebrity Special Purpose Acquisition Companies (SPACs) and investigate their post-Initial Public Offering (IPO) stock market performance.

After obtaining a sample of celebrity SPACs from the Spacresearch.com database, fraud risk characteristics were obtained from Lexis Nexus searches. Buy and hold abnormal returns were calculated for celebrity SPACs versus a small-cap equity benchmark for time intervals after IPO, and multiple regression analysis was performed to examine the relationship between fraud risk features and post-IPO returns.

Celebrity SPACs exhibit Fraud Diamond characteristics and significantly underperform a small-cap stock portfolio on a risk-adjusted basis after IPO.

This study only examines celebrity SPACs that conducted IPOs on the NYSE and NASDAQ/AMEX and does not include those that are traded on the Over the Counter Bulletin Board (OTCBB).

Celebrity endorsement of SPAC vehicles attracts investors who may not be properly informed regarding the risk characteristics of SPACs. Accordingly, investors should be warned that celebrity SPACs underperform a small-cap equity portfolio and exhibit significant elements of fraud risk.

The use of celebrity endorsement as a marketing device to attract investment in SPACs has regulatory implications.

To the best of the authors’ knowledge, this paper is the first to examine the fraud risk characteristics and post-IPO performance of celebrity SPACs.

This study aims to analyze the causes and implications of legal uncertainty in the issuance of conventional municipal bonds in Indonesia and to draw lessons from Vietnam’s approach in providing better legal certainty.

This study adopts a normative legal method with a legislative approach and applies a comparative approach. Data sources involve primary and secondary legal materials from both Indonesia and Vietnam.

The legal uncertainty is caused by a lack of coherence and consistency in legislation. Based on Vietnam’s experience, Indonesia can gain valuable insights related to providing strong legal certainty for parties involved in issuing or investing through conventional municipal bonds.

This study focuses on the comparative legal analysis of conventional municipal bonds in Indonesia with Vietnam.

This research provides recommendations for the refinement of legislation regarding conventional municipal bonds to the government.

This study is related to legal certainty as a strategy to attract investment through municipal bonds and to ensure the municipal bond issuance process is transparent and efficient.

This study provides a comparative perspective on the issuance of municipal bonds in Indonesia, with a special focus on Vietnam, emphasizing the urgency of harmonization in legal regulation and the sustainability of legal certainty.

The study aims to explore how the monitoring and resource provision function of board of directors impact the association between ownership concentration and small- and medium-sized enterprise (SME) initial public offering (IPO) underpricing in the context of an emerging economy like India.

The sample comprises 390 SME IPOs listed on Bombay Stock Exchange SME platform and National Stock Exchange EMERGE (EMERGE is the NSE new initiative for SMEs to raise the funds from investors) in India. To test the moderating impact of the board monitoring role and resource provision role, the study employs hierarchical moderated regression subject to the fulfillment of assumptions.

The findings divulge that ownership concentration significantly reduces underpricing, hinting towards the operationalization of alignment of interest hypothesis. With regards to moderating relationship, the study found that while board resource providing role negatively moderates the relationship between ownership concentration and SME IPO underpricing, board monitoring function fails to cast any significant impact on the relationship between ownership concentration and SME IPO underpricing.

The present study ignores larger firms listed on the main platform which have complex decision-making than smaller firms. Besides, it is confined to only a single country, i.e. India. Extending the study to other countries with similar institutional characteristics would have validated the findings. Furthermore, the moderating impact of other organizational factors like firm age, lifecycle of firm and change in technology would form an interesting avenue for future research.

The findings of the study have practical implications for managers in designing the adequate board structure that significantly reduces underpricing. It thus further advices the issuers on focusing more on strengthening the resource provision role of board of directors for achieving higher rewards. The findings are helpful to policymakers in framing such policies that enhance the resource-oriented role of board of directors and resource accessibility for SMEs. Furthermore, the results advise the investors to be relatively assured about the SMEs whose board exercises its resource provision role emphatically. Accordingly, findings are helpful to investors in making investment decisions in alternative market settings characterized by the concentrated ownership structure.

The study furthers the debate on the importance of two prominent roles played by board as a moderating variable in the underexplored context of IPO underpricing of small and medium-sized firms in India.

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.