Abstract:
The debate on why firms underprice initial public offering (IPO) has never
been
laid to rest. Driven
by this phenomenon of IPO underpricing, this paper sought to examine the determinants of IPO
underpricing in developing cou
ntries, using African countries as a case study. Specifically, the
study examined the effect of
offer size and
transaction volume on IPO underpricing.
Panel d
ata
was collected for all firms that issued IPOs in Nairobi Securities Exchange, Egyptian Exchange
and Johannesburg Stock Exchange for a period of fifteen years (1996 to 2011).
The results showed
that transaction volume had a
negative and
significant effect on IPO underpricing (
β =
-
0.074;
p<
0.
05)
while offer size had no significant effect
(β =
-
0.0
35; p>0.05)
. The study recommends that
issuers should take special consideration
on
transaction volume to maximize the return to
investors
