A comparative study: Underpricing and long-run performance of initial public offerings in Singapore Exchange and Bursa Malaysia from 2007-2016

• Main Authors: Ang, Ann Nicole Louise L., Domingo, Alexa May B., Maniulit, Paula M., Maniulit, Ysabel T.
• Format: text
• Language: English
• Published: Animo Repository 2021
• Subjects: Going public (Securities)—Singapore; Going public (Securities)—Malaysia; Stocks—Prices—Singapore; Stocks—Prices—Malaysia; Finance and Financial Management
• Online Access: https://animorepository.dlsu.edu.ph/etdb_finman/23; https://animorepository.dlsu.edu.ph/cgi/viewcontent.cgi?article=1002&context=etdb_finman
• Institution: De La Salle University

IPO underpricing is a recurring phenomenon as it has been proven to be prevalent across different stock exchanges including Singapore Exchange (SGX) and Bursa Malaysia (KLSE). Additionally, IPO underpricing is believed to influence long-run performance. Given this, this research looks into the level of underpricing in SGX and KLSE from 2007 to 2016, the possible determinants of underpricing and the relationship between underpricing and long-run performance. Possible underpricing determinants include ownership structure, firm size, firm age, offering price, offering size, financial leverage, return on equity and firm industry. A supplementary comparison between time periods of 2007-2011 and 2012-2016 was conducted. A total of 99 samples were employed in this research. Using stepwise regression and other supplementary statistical tools ran using Stata and SPSS, the researchers observed that underpricing is observed to be significantly higher in SGX (194.26%) than in KLSE (14.91%), especially for the earlier time period. Findings show that for SGX, Consumer Discretionary companies (2007-2016 and 2007-2011), Real Estate Companies (2007-2011) and Consumer Staple companies (2012-2016), lower offering size (2007-2011) and a lower offering price (2012-2016) have a higher level of underpricing. On the other hand, in KLSE, bigger firms (2007-2016 and 2012-2016) and older firms (2007-2011) tend to be more underpriced. When it comes to their long-run performance, underpriced stocks are expected to perform better in the long-run for IPOs listed in SGX. Meanwhile, results are insignificant for KLSE. Results on IPO underpricing and their impact on long-run performance are relevant especially to local and foreign investors as these may influence their buy-hold-sell decisions. Other stakeholders may also better understand the behavior of the market, make consistent and long-run profits, facilitate a well-functioning equity market and regulators, and enrich the evidence of the underpricing phenomenon as well as the long-run performance of IPOs.