Short-Run Underpricing of Initial Public Offerings (IPOs) : A Conceptual Review

The academic literature on IPOs short run performance grown quite rapidly over the last decade, due to its puzzling phenomena of under pricing. The current study aims at conducting a non-systematic review of literature on the theories and empirical evidences of initial public offering (IPO) under pricing in order to understand its meaning and dimensions. In this regard a thorough review of existing literature has done and it is found that the IPO short-run under pricing is associated almost with every financial market of the world. However, the magnitude of under pricing varies from one country to another, depends on the institutional structure, binding regulations, contractual mechanisms, and the characteristics of the firms going public. Various theories and propositions have been developed by the researchers to explain the phenomena of under pricing, which needs to be tested empirically at country-specific environment, such as; quality of legal framework, macroeconomic factors, and sociopolitical system