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Do anchor investors affect long run performance? Evidence from Indian IPO markets

Do anchor investors affect long run performance? Evidence from Indian IPO markets Anchor investor (AI) regulation was introduced in 2009 by the Indian market regulator Securities and Exchange Board of India to facilitate the price discovery process during the book-building mechanism. This study aims to examine the aftermarket pricing performance of initial public offering (IPO) firms over the long-run period of up to 36 months after the listing date in the anchor investor regime.Design/methodology/approachThe post-issue performance of 129 Indian IPOs issued from 2009 to 2014 is studied by using buy and hold abnormal returns, cumulative abnormal returns and wealth relatives approaches. This study presents the aftermarket performance indicators of Indian IPOs along with the comparative analysis between anchor-backed and non-anchor-backed IPO categories. Using multiple regression analysis, this study identifies the firm-level variables and issue characteristics that can explain long-term IPO performance.FindingsThis study reports that Indian IPOs continue to underperform in the long run in the anchor regulation era as well. However, anchor-backed IPOs are reported to underperform lesser than the IPOs not backed by anchor investment. Additionally, this study documents that the variables, i.e. offer size, grade, post-issue promoter holding and IPOs issued during hot IPO periods, are significant in explaining the 36-month aftermarket performance.Originality/valueThis study investigates the long-run aftermarket pricing performance of anchor affiliated IPOs in the Indian market context. Thus, it contributes to the limited primary markets’ research from emerging economies. Further, the results provide fresh evidence reaffirming the credibility of AI as an institutional investor for attestation of quality of the issues. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Pacific Accounting Review Emerald Publishing

Do anchor investors affect long run performance? Evidence from Indian IPO markets

Pacific Accounting Review , Volume 33 (3): 25 – Aug 13, 2021

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Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
0114-0582
DOI
10.1108/par-09-2020-0149
Publisher site
See Article on Publisher Site

Abstract

Anchor investor (AI) regulation was introduced in 2009 by the Indian market regulator Securities and Exchange Board of India to facilitate the price discovery process during the book-building mechanism. This study aims to examine the aftermarket pricing performance of initial public offering (IPO) firms over the long-run period of up to 36 months after the listing date in the anchor investor regime.Design/methodology/approachThe post-issue performance of 129 Indian IPOs issued from 2009 to 2014 is studied by using buy and hold abnormal returns, cumulative abnormal returns and wealth relatives approaches. This study presents the aftermarket performance indicators of Indian IPOs along with the comparative analysis between anchor-backed and non-anchor-backed IPO categories. Using multiple regression analysis, this study identifies the firm-level variables and issue characteristics that can explain long-term IPO performance.FindingsThis study reports that Indian IPOs continue to underperform in the long run in the anchor regulation era as well. However, anchor-backed IPOs are reported to underperform lesser than the IPOs not backed by anchor investment. Additionally, this study documents that the variables, i.e. offer size, grade, post-issue promoter holding and IPOs issued during hot IPO periods, are significant in explaining the 36-month aftermarket performance.Originality/valueThis study investigates the long-run aftermarket pricing performance of anchor affiliated IPOs in the Indian market context. Thus, it contributes to the limited primary markets’ research from emerging economies. Further, the results provide fresh evidence reaffirming the credibility of AI as an institutional investor for attestation of quality of the issues.

Journal

Pacific Accounting ReviewEmerald Publishing

Published: Aug 13, 2021

Keywords: Initial public offering; Abnormal returns; Anchor investors; Indian markets; Long-run performance

References