Title

The Short-run Underpricing of Initial Public Offerings in Sri Lankan Stock Market

Department/School

Finance

Date of this version

2010

Document Type

Article

Keywords

IPOs, underpricing, uncertainty hypothesis, investor sentiment, privatization

Abstract

The abstract should be a concise 250-300 word summary of the content of the work. This study investigates underpricing of IPOs in Sri Lanka. On average, IPOs are underpriced by 34%. Small issues are more underpriced than large issues, and privatization issues are more underpriced than conventional issues. Investor sentiment is positively related with underpricing and affects small and large issues similarly. Small privatization issues are more underpriced than large privatization issues, and partially explain the asymmetry in underpricing between small and large issues. However, even after controlling for privatization, small issues remain more underpriced than large issues. The results strongly support the uncertainty hypothesis for larger underpricing of small issues and privatization issues.

Published in

Journal of Multinational Financial Management

Citation/Other Information

20, 197-213