Shariah-compliant status and IPO oversubscriptions

Ahmad Hakimi Tajuddin, Nur Adiana Hiau Abdullah and Kamarun Nisham Taufil Mohd

Journal of Islamic Accounting and Business Research, 2018, vol. 9, issue 4, 531-548

Abstract: Purpose - The purpose of this paper is to examine the impact ofShariah-compliant status on oversubscription of initial public offerings (IPOs) in Malaysia. It is believed that theShariah-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 betweenShariah-compliant status and oversubscription ratio, which suggests that companies withShariahstatus could draw the attention of the investors. Strict guidelines and permissible elements ofShariah-compliant are considered agreeable and amicable by the investors. Research limitations/implications - Future studies should look into financial ratio benchmark (cash and debt) for determiningShariah-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 ofShariah-compliant status on oversubscription in the IPO market.

Keywords: IPO; Financial crisis; Institutional investors; Retail investors; Quantile; Fixed price mechanism; Offer size; Oversubscription; Shariah-compliant status; Initial returns (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:jiabrp:jiabr-10-2017-0147

DOI: 10.1108/JIABR-10-2017-0147

Access Statistics for this article

Journal of Islamic Accounting and Business Research is currently edited by Dr Mohammad Hudaib and Prof Roszaini Haniffa

More articles in Journal of Islamic Accounting and Business Research from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().