IPO Underpricing Determinants: Empirical Evidence from Companies Going Public in the Indonesian Capital Market
Keywords:
Initial Public Offering (IPO); Initial Return; Firm Size; Underwriter Reputation; Financial Performance.Abstract
Background: Initial Public Offering (IPO) pricing remains a critical issue in capital markets, particularly in emerging economies where information asymmetry and market uncertainty influence initial returns. Understanding the determinants of initial return is essential for both investors and issuing firms.
Objective: This study aims to analyze the factors influencing initial return among companies conducting IPOs on the Indonesia Stock Exchange during the period 2018–2025.
Methods: A quantitative approach was employed using multiple linear regression analysis. The sample consists of IPO firms that met the criteria of complete financial data and stock price availability. The variables examined include firm size, underwriter reputation, return on assets, financial leverage, and earnings per share.
Results: The findings reveal that all variables jointly influence initial return. However, partially, only firm size shows a significant negative effect, indicating that larger firms tend to experience lower levels of uncertainty, leading to smaller initial returns. Other variables, including financial performance indicators and underwriter reputation, do not demonstrate a significant individual effect.
Conclusion: This study contributes to the capital market literature by highlighting the dominant role of firm size in IPO pricing within emerging markets and provides insights for investors and issuers in making strategic investment decisions.
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