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Shariah-compliant status and IPO oversubscriptions

Tajuddin, Ahmad Hakimi and Abdullah, Nur Adiana Hiau and Taufil Mohd, Kamarun Nisham (2018) Shariah-compliant status and IPO oversubscriptions. Journal of Islamic Accounting and Business Research, 9 (4). pp. 531-548. ISSN 1759-0817

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Purpose – The purpose of this paper is to examine the impact of Shariah-compliant status on oversubscription of initial public offerings (IPOs) in Malaysia. It is believed that the Shariah-compliant status serves as a platform that sends a credible signal to investors which could possibly explain the IPO oversubscription anomaly. Design/methodology/approach – This study used a multivariate and quantile regression model which involved 252 IPOs listed on Bursa Malaysia from 2005 to 2015.Findings – The results show a significant positive relationship between Shariah-compliant status and oversubscription ratio, which suggests that companies with Shariah status could draw the attention of the investors.Strict guidelines and permissible elements of Shariah-compliant are considered agreeable and amicable by the investors. Research limitations/implications – Future studies should look into financial ratio benchmark (cash and debt) for determining Shariah-compliant status to enhance the understanding of oversubscription of IPOs in Malaysia. Practical implications – This study offers practical understanding to the issuers and underwriters on the factors that should be considered in assuring a good early performance of their issuance. Therefore, it will benefit the issuers and underwriters in managing and planning the IPO process carefully. Social implications – The results of this study provide a new insight for investors regarding important information found in the prospectus when making the decisions to subscribe to IPOs. Originality/value – This paper is one of the first to provide an empirical evidence of the impact of Shariah-compliant status on oversubscription in the IPO market.

Item Type: Article
Uncontrolled Keywords: IPO, Financial crisis, Institutional investors, Retail investors, Quantile, Fixed price mechanism, Offer size, Oversubscription, Shariah-compliant status, Initial returns
Subjects: H Social Sciences > HG Finance
Divisions: School of Economics, Finance & Banking
Depositing User: Mrs. Norazmilah Yaakub
Date Deposited: 19 Feb 2019 08:31
Last Modified: 19 Feb 2019 08:31
URI: http://repo.uum.edu.my/id/eprint/25609

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