The effects of institutional ownership, leverage and earnings per share on offer price: an empirical study of IPO in Malaysia

Zi, Ong Chui (2016) The effects of institutional ownership, leverage and earnings per share on offer price: an empirical study of IPO in Malaysia. Masters thesis, Universiti Utara Malaysia.

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Abstract

This study examines the effects of institutional ownership, leverage and earnings per share on the offer price in 71 Malaysian IPOs within the periods from year 2011 to 2015. This research examines the hypotheses by employing cross-sectional multiple regression. The finding indicates that there is a negative relationship between institutional ownership and IPO offer price. This implies that high percentage of institutional investors involve into IPO markets lead to less uncertainty of IPOs, and hence low offer price is issued since uninformed investors require high initial returns from investing, which supports Rock’s Winner’s Curse Theory. Moreover, earnings per share is positively related to the IPO offer price. This indicates that a good quality firms able to generate favorable profits in future, in which support signaling theory. However, there is no relationship between leverage and IPO offer price is found from the results.

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