Does ownership structure affecting ipo underpricing: A case of indian stock market?

The initial public offering (IPO) is an important life cycle of a firm and has significant effects on the firm's ownership structure. Ownership structure plays a dominant role in shareholding pattern in initial public offerings.

This paper investigates the association between ownership structure and level of underpricing at Indian stock market. We make use of a large sample of 319 firms for listed on Bombay stock exchange during 20002011. It is argued that higher underpricing induces investor's participation. Shareholding patterns divided into four categories i.e. Indian promoters, foreign promoters, Institutional non promoters and non institutional non promoters.

Using a sample of Indian IPOs of 319, we provide evidence of statistically significant relationship between ownership structures i.e. Indian promoters, foreign promoters, institutional non promoters and non institutional non promoters and level of underpricing.

Overall, our analysis suggests that only Indian promoter's and non institutional non- promoters has significant affected the level of underpricing. There is negative relationship between Indian promoters holding and level of underpricing. There is positive relationship between non institutional non-promoters and level of underpricing. There is no significant relationship between foreign promoter and institutional non promoters holding and level of underpricing.