FACTORS FORMING IPO UNDERPRICING IN EMERGING MARKET: INSTITUTIONAL OWNERSHIP MODERATION
Underpricing has been a common occurrence in every initial public offering (IPO) event. From 1993 to 2019, about 80% of IPO businesses on the Indonesia Stock Exchange (IDX) were underpriced. The purpose of this study is to investigate the impact of past financial performance information and institutional ownership as indicators of strengthening or weakening past financial performance information on underpricing dynamics in all sectors of firms that go public on the IDX over the last 28 years. Data gathered from public prospectuses of IPO businesses in all industries at IDX from 1993 to 2019 were analyzed using pure moderation and sub-group regression. The findings show consistently, return on equity, firm age, and institutional ownership significantly reduce underpricing. The relationship between ROE and underpricing also moderated by institutional ownership. These results prove that institutional ownership became most important component in determining stock trading around the IPO event. This article contributes to validating the asymmetric information hypothesis in the contex of IPO by making institutional ownership the most important things and significant determinants of underpricing.
Underpricing; Return on Equity; Firm Age; Institutional Ownership, Indonesian Stock Exchange