Does Ownership Structure Affecting IPO Underpricing : A Case of Indian Stock Market?

INTRODUCTION: The initial public offering (IPO) is an important life cycle of a firm and has significant effects on the firm’s ownership structure. Ownership structure plays a dominant role in shareholding pattern in initial public offerings. PURPOSE OF THE STUDY: This paper investigates the association between ownership structure and level of underpricing at Indian stock market. We make use of a large sample of 319 firms for listed on Bombay stock exchange during 2000-2011. It is argued that higher underpricing induces investor’s participation. Shareholding patterns divided into four categories i.e. Indian promoters, foreign promoters, institutional non-promoters and non institutional non-promoters. RESEARCH METHODOLOGY: Using a sample of Indian IPOs of 319, we provide evidence of statistically significant relationship between ownership structures i.e. Indian promoters, foreign promoters, institutional non-promoters and non institutional non-promoters and level of underpricing. FINDINGS: Overall, our analysis suggests that only Indian promoter’s and non institutional non-promoters has significant affected the level of underpricing. There is negative relationship between Indian promoters holding and level of underpricing. There is positive relationship between non institutional non-promoters and level of underpricing. There is no significant relationship between foreign promoter and institutional non-promoters holding and level of underpricing