IPO waiting period in Pakistan

Abstract

This study examines the IPO waiting period from offering to the first trading day listed on the Pakistan Stock Exchange from 1995 to 2018. We find that firms float shares to the general public have passed through multiple layers of inspection by underwriters, auditors, institutional investors, and regulatory bodies like SECP. The waiting period of unseasoned issue is an essential predictor of uncertainty associated with a firm. To test this proposition, we first determine the endogenous factors related to an issuer itself like offer price, price discovery method, size, and age of the firm. We then incorporated some exogenous factors, most importantly, the hot IPO period, market sentiment, and regulatory regime to investigate their impact on the waiting period. The results confirm that offer-price, percentage of shares after IPO, book building mechanism and SECP regime influence the IPO waiting period. This study further finds that short waiting period IPOs are associated with less ex-ante uncertainty thereby lowering under-pricing. In addition, short waiting period IPOs are prone to less return volatility and higher the aftermarket stock performance.