A study on the relationship between macroeconomic factors and number of IPOs in Malaysia

• Main Author: Rudra Raam, Murugasu
• Format: Thesis
• Language: English; English
• Published: 2021
• Subjects: HG Finance; HJ Public Finance
• Online Access: https://etd.uum.edu.my/10386/1/grant%20the%20permission_s821319.pdf; https://etd.uum.edu.my/10386/2/s821319_01.pdf; https://etd.uum.edu.my/10386/
• Institution: Universiti Utara Malaysia

This study studies the relationship between the stock market index and exchange rate on the number of IPOs in Malaysia from year 2000 to 2016. This study examines the relationship by performing cointegration regression and Vector Error Correction Model to study the short and long-run causal effects between stock market index, exchange rate and the number of IPOs. The findings of the data show that there exists a unidirectional long-run equilibrium causal relationship between the stock market index, exchange rate and number of IPOs in Malaysia where the exchange rate exhibits a negative relationship with the number of IPOs. This shows that higher returns in stock market returns lead to higher number of IPOs on the long run. This implies that business may prefer to list an IPO when stock market returns are high as this may enable the business to obtain higher valuations. Besides, the negative relationship between exchange rate and number of IPOs imply that business may refrain from listing when there is heightened volatility in the exchange rate. This result support the investor sentiment theory. However, in the short run the stock market index and the exchange rate does not have a significant relationship with the number of IPOs in Malaysia.