ETERMINANTS OF INITIAL PUBLIC OFFERING (IPO) UNDERPRICING IN NEPAL
Date
2024
Authors
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Journal ISSN
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Publisher
Shanker Dev Campus
Abstract
This study investigate the determinants of initial public offering (IPO) underpricing in
Nepal. The objectives of this study includes to examine the perception of investors
towards IPO in Nepal, to analyze the relationship between different factors on
underpricing in IPO and to examine the impact of different factors on underpricing in
IPO. In this analysis, goodwill, corporate profile, financial position, lack of other
investment and sector performance are the independent variables and underpricing in IPO
(UP) is dependent variable. The study employ mean, standard deviation, correlation and
multiple regression analysis were used to present data and draw conclusion. The major
finding is that the descriptive statistics reveal that factors such as goodwill, corporate
profile, financial position, and sector performance all play a critical role in determining
the degree of underpricing in IPOs. In comparing the correlations, Corporate Profile (CP)
shows the strongest relationship with Underpricing (UP), followed closely by Financial
Position (FP) and Goodwill (GW). This suggests that firms with a stronger corporate
image and financial health are more likely to engage in IPO underpricing, potentially as a
strategic move to attract investors or oversubscribe the IPO. The high correlation between
Financial Position (FP) and Sector Performance (SP) reflects the importance of industry
conditions in determining a firm’s financial health. In regression analysis, Sector
Performance, Lack of Other Investment, Goodwill, Corporate Profile, and Financial
Position, collectively have a significant effect on IPO underpricing. The regression model
explains about 31.1percent of the variance in underpricing, which is statistically
significant as evidenced by the high F-statistic and a p-value of 0.000. However, the
relatively large residual sum of squares and mean square indicate that a considerable
portion of the variance in IPO underpricing remains unexplained, suggesting the need for
further exploration of additional factors or a more nuanced model to capture the
complexity of IPO pricing dynamics in Nepal.