Effect of Institutional Ownership and Market Factors on IPOs Under-Pricing in Pakistan

This paper aims to investigate the effect of institutional ownership and market factors on IPO under pricing. In institution ownership variables industrial ownership, financial ownership and ex-anti uncertainty are included and in market variables over subscription, market sentiment and under writer’s reputation are considered. Cross sectional data from 2001 to 2012 is taken into account for 55 IPO firms in order to validate results. Multiple regressions were used to achieve study objectives. Findings revealed the fact that institutional ownership factors like industrial and financial ownership and market factors like over subscription and market sentiment are major predictors of the under-pricing in Pakistan. Ex-anti uncertainty and under writer’s reputation has no effect on under pricing for the current study. So, firms going to be public and perspective investors are major users of this study as they can take guidance for future investments. They can make sensible decisions for the future by using results of this study.