1. Home
  2. Vol 1, No 1 (2018)
  3. Angelia

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



Full Text: PDF



References


[1] Rock K 1986 Why new issues are underpriced Journal of Financial Economics 187- 212

[2] Capen E, Clapp R, and Campbell W 1971 Competitive bidding in high-risk situations Journal of Petroleum Technology 641-53

[3] Ljungqvist A 1993 Underpricing and long term performance of German IPOs Working Paper

[4] Beatty R, and Ritter J 1986 Investment banking, reputation, and the underpricing of initial public offerings Journal of Financial Economics 213-32.

[5] Allen F and Faulhaber G 1989 Signalling by underpricing in the IPO market Journal of Financial Economics 303-23

[6] Titman S and Trueman B 1986 Information quality and the valuation of new issues Journal of Accounting and Economics 159-72

[7] Holland K M and Horton J 1993 Initial public offerings on the unlisted securities market: the impact of professional advisers Journal of Accoounting and Business Research 19-34

[8] Michaely R and Shaw W H 1995 Does the choice of auditor convey quality in an initial public offering? Finance Management 15-30

[9] Palmrose Z 1988 An analysis of auditor litigation and audit service quality The Accounting Review 55-73

[10] Chemmanur T and Fulghieri P 1994 Investment bank reputation, information production, and financial intermediation Journal of Finance 57-79

[11] Ammer M A and Ahmad-Zaluki N 2016 The effect of underwriter's market share, spread and earnings management forecasts bias and accuracy on underpricing of Malaysian IPOs International Journal of Managerial Finance 1-26

[12] Carter R and Manaster S 1990 Initial public offerings and underwriter reputation Journal of Finance 1045-67

[13] Megginson W L and Weiss K A 1990 Venture capitalist certification in initial public offerings The Journal of Finance 879-903

[14] Chen C and Mohan N 2002 Underwriter spread, underwriter reputation, and IPO underpricing: a simultaneous equation analysis Journal of Business Finance & Accounting 521-40


Article View

Abstract views : 867 times | PDF files viewed : 324 times



Refbacks

  • There are currently no refbacks.


Copyright (c) 2018 PROCEEDINGS OF ICEBAM

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.