An Empirical Investigation On The Underpricing And Earnings Management Of Initial Public Offerings In Bangladesh

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Date
2011-06
Authors
Islam, Md. Aminul
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Publisher
Universiti Sains Malaysia
Abstract
This study examined companies, which were newly listed on the Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE) for the period 1995-2005. The purpose of this study is to explore issues related to initial public offerings (IPO) underpricing and earning management in the context of Bangladesh capital market. Data were collected from company prospectuses, DSE and CSE Daily Diaries; DSE, CSE and SEC websites, and annual Report of listed Companies. A total of 132 companies listed at DSE and 206 at CSE respectively which are listed during the study period were selected for this study. Based on the findings, the following conclusions can be drawn on IPO underpricing; (i) the level of underpricing is still very high (156.16 percent at DSE and 433.91 percent at CSE respectively). The main contributory factors are the ‘Fixed price method’ in pricing the IPOs and existence of dual listing phenomenon. The other contributory factors are offer size, size of firm and the sector they are listed with. The sector that an IPO is listed with was a new factor tested in this study and found to have significant effect on the level of underpricing, (ii) the findings confirmed that dual listing significantly affect the level of underpricing. Therefore it is concluded that the ‘One price theory’ is not applicable in the context of Bangladesh capital with dual listing phenomenon.
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Keywords
Underpricing And Earnings Management , Initial Public Offerings
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