Group Affiliation and the Performance of Initial Public Offerings in the Indian Stock Market

63 Pages Posted: 3 Nov 2008

See all articles by Marti G. Subrahmanyam

Marti G. Subrahmanyam

New York University (NYU) - Leonard N. Stern School of Business

Vijaya B. Marisetty

RMIT University; Financial Research Network (FIRN)

Multiple version iconThere are 2 versions of this paper

Date Written: September 2006

Abstract

We document the effects of group affiliation on the initial performance of the 2,713 Initial Public Offerings (IPOs) in India under three regulatory regimes during the period 1990-2004. We distinguish between two competing hypotheses regarding group affiliation and a firm’s initial stock market performance: the certification hypothesis and the “tunneling” hypothesis. We show that the underpricing of group companies is higher than that of stand-alone companies, lending support to the tunneling hypothesis. However, on an ex post basis, we find that group-affiliated companies have a higher probability of survival than their stand-alone counterparts: groups appear to support their affiliates to maintain their reputation.

Keywords: Initial Public Offering (IPO), Underpricing, Business Groups, Certification

Suggested Citation

Subrahmanyam, Marti G. and Marisetty, Vijaya B., Group Affiliation and the Performance of Initial Public Offerings in the Indian Stock Market (September 2006). NYU Working Paper No. 2451/26384, Available at SSRN: https://ssrn.com/abstract=1293655

Marti G. Subrahmanyam (Contact Author)

New York University (NYU) - Leonard N. Stern School of Business ( email )

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Vijaya B. Marisetty

RMIT University ( email )

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