The Effect of Auditor’s Reputation, Underwriter’s Market Share and Spread on Underpricing of Indonesian Initial Public Offerings



Author (s)


(1)  Jessica Angelia   (Universitas Kristen Petra)  
        Indonesia
(2) * Sautma Ronni Basana   (Universitas Kristen Petra)  
        Indonesia
(*) Corresponding Author

Abstract


The presence of capital market supporting professions and institutions such as auditor and underwriter are required by the Indonesia Stock Exchange (IDX) to assist issuing company in the process of going public. Using a total of 156 non-financial firm IPOs listed on IDX during the period 2007-2017, the main purpose of this paper is to investigate the effect of auditor’s reputation, underwriter’s market share and spread on level of underpricing, The method used in this paper is pooled Ordinary Least Squares (OLS) regression. Findings of this paper showed that underwriter’s market share and auditor’s reputation have a significant negative effect on level of underpricing, while underwriter’s spread is insignificant to underpricing. This paper concludes that in Indonesia underpricing is lower for IPO firm that associated with reputable auditor and high-market share underwriter. Also, underwriters use their spread to substitute underpricing rather than using it as a complement


Keywords

Auditor’s Reputation, Underwriter’s Market Share, Spread on Underpricing



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