The influence of “offer for sale” by existing shareholders on investors’ reaction in the IPO immediate aftermarket

Norliza Che-Yahya, Ruzita Abdul Rahim, Rasidah Mohd Rashid

Research output: Contribution to journalArticle

Abstract

This study investigates the influence of “offer for sale” by existing shareholders on investors’ reaction in the IPO immediate aftermarket. The “offer for sale” is measured by the proportion of shares offered to public from the sale of the existing shareholdings prior to IPO against the total number of shares offered during IPO. The “offer for sale” activity suggests that proceed from the shares sold at an IPO would go into the pocket of the existing shareholders. That is, the proceed does not actually meet the primary goals of the IPO to raise funds for business expansion. IPO firms that go public mainly through “offer for sale” activity are expected to receive less demand during IPO from potential investors as the investors are less optimistic in firms which their shares are offered mostly through “offer for sale” activity relative to firms which their shares are newly issued. Thus, firms which their shares are offered through “offer for sale” activity are predicted to produce poor initial aftermarket return and trading. Using a final sample of 419 Malaysian IPOs issued from January 2000 to December 2015, regression results of this study reveal that firms which their shares are offered highly through “offer for sale” report poor and lower initial aftermarket return and trading volume. The results support the proposition of this study that investors are less optimistic in firms which their shares are offered mostly through “offer for sale” activity.

Original languageEnglish
Pages (from-to)818-828
Number of pages11
JournalBusiness and Economic Horizons
Volume14
Issue number4
DOIs
Publication statusPublished - 1 Jan 2018

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Investors
Aftermarket
Shareholders
Shareholding
Trading volume
Proportion

Keywords

  • Investors’ reaction
  • IPO immediate aftermarket
  • Malaysia
  • Offer for sale

ASJC Scopus subject areas

  • Business and International Management
  • Economics, Econometrics and Finance(all)

Cite this

The influence of “offer for sale” by existing shareholders on investors’ reaction in the IPO immediate aftermarket. / Che-Yahya, Norliza; Abdul Rahim, Ruzita; Rashid, Rasidah Mohd.

In: Business and Economic Horizons, Vol. 14, No. 4, 01.01.2018, p. 818-828.

Research output: Contribution to journalArticle

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