Initial returns of Shariah versus non-Shariah IPOs

Are there any differences?

Ruzita Abdul Rahim, Nor Azizan Che-Embi

Research output: Contribution to journalArticle

5 Citations (Scopus)

Abstract

This study examines a sample of 384 initial public offerings (IPOs) issued and listed on Bursa Malaysia from January 1999 to December 2008. The objectives of this study are to examine the difference in initial returns of Shariah versus non-Shariah IPOs and the factors that explain the initial returns of these IPOs. A matched sample of Shariah IPOs, which contains the same number of IPOs and share similar characteristics with the non-Shariah IPOs, is created to ensure a more compatible comparison. The results of the difference tests consistently show that the initial returns of non-Shariah IPOs are not statistically different from those of all and matched sample of Shariah IPOs. The cross-sectional multiple regressions yield results demonstrating that Shariah and non-Shariah IPOs share only one common factor: allocation rate. Other than the sole common factor, the initial returns of non-Shariah IPOs are determined by external factors, namely the reputation of the underwriter and the condition of the market. On the contrary, the initial returns of the Shariah IPOs (all) depend on internal factors, namely the size of the offer; the age of the firm; and the ownership of the top five shareholders. As far as the result of the matched Shariah sample is concerned, none of the other variables are significant in explaining the initial returns.

Original languageEnglish
JournalJurnal Pengurusan
Volume39
Publication statusPublished - 2013

Fingerprint

Initial public offerings
Common factors
Factors
Underwriters
External factors
Internal factors
Malaysia
Multiple regression
Shareholders
Ownership

Keywords

  • Allocation rate
  • Growth motive
  • IPO initial return
  • Non-Shariah IPOs
  • Shariah IPOs

ASJC Scopus subject areas

  • Business, Management and Accounting (miscellaneous)
  • Accounting
  • Business and International Management

Cite this

Initial returns of Shariah versus non-Shariah IPOs : Are there any differences? / Abdul Rahim, Ruzita; Che-Embi, Nor Azizan.

In: Jurnal Pengurusan, Vol. 39, 2013.

Research output: Contribution to journalArticle

@article{c318e64dc6dc424eb812b95e4a796886,
title = "Initial returns of Shariah versus non-Shariah IPOs: Are there any differences?",
abstract = "This study examines a sample of 384 initial public offerings (IPOs) issued and listed on Bursa Malaysia from January 1999 to December 2008. The objectives of this study are to examine the difference in initial returns of Shariah versus non-Shariah IPOs and the factors that explain the initial returns of these IPOs. A matched sample of Shariah IPOs, which contains the same number of IPOs and share similar characteristics with the non-Shariah IPOs, is created to ensure a more compatible comparison. The results of the difference tests consistently show that the initial returns of non-Shariah IPOs are not statistically different from those of all and matched sample of Shariah IPOs. The cross-sectional multiple regressions yield results demonstrating that Shariah and non-Shariah IPOs share only one common factor: allocation rate. Other than the sole common factor, the initial returns of non-Shariah IPOs are determined by external factors, namely the reputation of the underwriter and the condition of the market. On the contrary, the initial returns of the Shariah IPOs (all) depend on internal factors, namely the size of the offer; the age of the firm; and the ownership of the top five shareholders. As far as the result of the matched Shariah sample is concerned, none of the other variables are significant in explaining the initial returns.",
keywords = "Allocation rate, Growth motive, IPO initial return, Non-Shariah IPOs, Shariah IPOs",
author = "{Abdul Rahim}, Ruzita and Che-Embi, {Nor Azizan}",
year = "2013",
language = "English",
volume = "39",
journal = "Jurnal Pengurusan",
issn = "0127-2713",
publisher = "Penerbit Universiti Kebangsaan Malaysia",

}

TY - JOUR

T1 - Initial returns of Shariah versus non-Shariah IPOs

T2 - Are there any differences?

AU - Abdul Rahim, Ruzita

AU - Che-Embi, Nor Azizan

PY - 2013

Y1 - 2013

N2 - This study examines a sample of 384 initial public offerings (IPOs) issued and listed on Bursa Malaysia from January 1999 to December 2008. The objectives of this study are to examine the difference in initial returns of Shariah versus non-Shariah IPOs and the factors that explain the initial returns of these IPOs. A matched sample of Shariah IPOs, which contains the same number of IPOs and share similar characteristics with the non-Shariah IPOs, is created to ensure a more compatible comparison. The results of the difference tests consistently show that the initial returns of non-Shariah IPOs are not statistically different from those of all and matched sample of Shariah IPOs. The cross-sectional multiple regressions yield results demonstrating that Shariah and non-Shariah IPOs share only one common factor: allocation rate. Other than the sole common factor, the initial returns of non-Shariah IPOs are determined by external factors, namely the reputation of the underwriter and the condition of the market. On the contrary, the initial returns of the Shariah IPOs (all) depend on internal factors, namely the size of the offer; the age of the firm; and the ownership of the top five shareholders. As far as the result of the matched Shariah sample is concerned, none of the other variables are significant in explaining the initial returns.

AB - This study examines a sample of 384 initial public offerings (IPOs) issued and listed on Bursa Malaysia from January 1999 to December 2008. The objectives of this study are to examine the difference in initial returns of Shariah versus non-Shariah IPOs and the factors that explain the initial returns of these IPOs. A matched sample of Shariah IPOs, which contains the same number of IPOs and share similar characteristics with the non-Shariah IPOs, is created to ensure a more compatible comparison. The results of the difference tests consistently show that the initial returns of non-Shariah IPOs are not statistically different from those of all and matched sample of Shariah IPOs. The cross-sectional multiple regressions yield results demonstrating that Shariah and non-Shariah IPOs share only one common factor: allocation rate. Other than the sole common factor, the initial returns of non-Shariah IPOs are determined by external factors, namely the reputation of the underwriter and the condition of the market. On the contrary, the initial returns of the Shariah IPOs (all) depend on internal factors, namely the size of the offer; the age of the firm; and the ownership of the top five shareholders. As far as the result of the matched Shariah sample is concerned, none of the other variables are significant in explaining the initial returns.

KW - Allocation rate

KW - Growth motive

KW - IPO initial return

KW - Non-Shariah IPOs

KW - Shariah IPOs

UR - http://www.scopus.com/inward/record.url?scp=84893950389&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84893950389&partnerID=8YFLogxK

M3 - Article

VL - 39

JO - Jurnal Pengurusan

JF - Jurnal Pengurusan

SN - 0127-2713

ER -