FACTORS INFLUENCING INVESTORS INVESTMENT IN INITIAL

PUBLIC OFFERING
NAMRATA N. KHATRI

Assistant Professor, Department of Business & Industrial Management, Veer Narmad South Gujarat University, Surat

Abstract -
Introduction – An initial public offering is the sales of company’s stock to the public for the first time. The primary impetus
for an IPO is generally either to rise capital or to offer an exit strategy. In fact the firm in most incipient stage of
development generally relies entirely on personal loans, saving, family and friends for their initial financing. The reason for
IPO issues are following
Research Methodology – The present study follows a descriptive research design, with structured questionnaire as
information collection tool. The respondents for the study were the investors of Surat City who are investing in IPOs. The
respondents were selected using a non-probability convenient sampling technique. The analysis of the data is done by using
descriptive as well as inferential statistics.
Major Findings – The analysis of the data reveals that majority of the investor’s takes broker’s advice while investing in
IPO and the major problem faced by the investors is delay in refund and lack of clarity in allotment. The factor analysis
states that there are three major factors that influence investors while investing in IPO are Company Philosophy, Future
Prediction and Projection, News relating to company IPO and Financial Performance.
Managerial Implications – The outcome of study could be considered by brokering firms, issuing companies and investors
as inputs for more focused services.

Keywords - Initial Public Offerings, Investors, Problems, Factors

I. INTRODUCTION of Reliance Petrochemicals Pvt. Ltd., this trend was

carried on in nineties and later years too.
An initial public offering is the sales of company’s
stock to the public for the first time. The primary The primary issues market resurrected itself after
impetus for an IPO is generally either to rise capital 2003 largely triggered by the divestment programme
or to offer an exit strategy. In fact the firm in most of public sector companies. With the issue of Maruti
incipient stage of development generally relies Udyog Limited, the government sold part of it stake
entirely on personal loans, saving, family and friends in the company for Rs. 1000 crore. In 2007, India was
for their initial financing. The reason for IPO issues named as seventh biggest IPO market of the world.
are following
The IPO Process in India
For Funding Needs The IPO process in India consists of the following
Funding Capital Requirements for Organic Growth, steps: -
Expansion through Projects, Diversification, Funding  Appointment of merchant banker and other
Global Requirements,Funding Joint Venture and intermediaries
Collaborations needs, Funding Infrastructure  Registration of offer document
Requirements, Marketing Initiatives and Distribution  Marketing of the issue
Channels, Financing Working Capital Requirements,  Post- issue activities
Funding General Corporate Purposes, Investing in
businesses through other companies, Repaying debt II. MARKETING OF THE ISSUE
to strengthen the Balance Sheet and Meeting Issue
Expenses  Timing of the Issue: An appropriate decision
regarding the timing of the IPO should be made,
For Non-funding Needs keeping in mind the general sentiments
Enhancing Corporate Stature, Retention and incentive prevailing in the investor market. For example,
for Employees through stock options, Provide if recession is prevailing in the economy (the
liquidity to the shareholders investors are pessimistic in their approach), then
the firm will not be able to get a good pricing
The IPO trend came in India in the eighties when a for its IPO, as investors may not be willing to
large number of companies, organization came out put their money in stocks.
with public issues, which triggered a growth in the  Retail distribution: Retail distribution is the
primary market. An entire industry of Merchant process through which an attempt is made to
Bankers, Brokers, Agents and Retail Investors grew increase the subscription. Normally, a network
in the primary issues market. During this period one of brokers undertakes retail distribution. The
of the biggest IPO was brought by Dhirubhai Ambani issuer company organizes road shows in which

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 Factors Influencing Investors Investment in Initial Public Offering

conferences are held, which are attended by  The grades are allocated on a 5-point scale, the
high net worth investors, brokers and sub- lowest being Grade 1 and highest Grade
brokers. The company makes presentations and  IPO Grading is intended to provide the investor
solves queries raised by participants. This is one with an informed and objective opinion
of the best ways to raise subscription. expressed by a professional rating agency after
 Reservation in the Issue: Sometimes analyzing factors like business and financial
reservations are tailored to a specific class of prospects, management quality and corporate
investors. This reduces the amount to be issued governance practices etc. However, irrespective
to the general public. of the grade obtained by the issuer, the investor
needs to make his/her own independent decision
IPO Grading regarding investing in any issue after studying
IPO grading is the grade assigned by a Credit Rating the contents of the prospectus including risk
Agency registered with SEBI, to the initial public factors carefully.
offering (IPO) of equity shares or any other security  SEBI does not play any role in the assessment
which may be converted into or exchanged with made by the grading agency. The grading is
equity shares at a later date. The grade represents a intended to be an independent and unbiased
relative assessment of the fundamentals of that issue opinion of that agency.
in relation to the other listed equity securities in India.  The grading is intended to be an independent and
Such grading is generally assigned on a five-point unbiased opinion of a rating agency. SEBI does
point scale with a higher score indicating stronger not pass any judgment on the quality of the issuer
fundamentals and vice versa as below. company. SEBI’s observations on the IPO
document are entirely independent of the IPO
IPO grade 1: Poor fundamentals grading process or the grades received by the
IPO grade 2: Below-average fundamentals company.
IPO grade 3: Average fundamentals
IPO grade 4: Above-average fundamentals III. REVIEW OF LITERATURE
IPO grade 5: Strong fundamentals
J. D. Knopf & J. L. Teall (1999) – “The IPO Effect
IPO grading has been introduced as an endeavor to and Measurement of Risk”. Numerous empirical
make additional information available for the studies of the well documented IPO underpricing
investors in order to facilitate their assessment of anomaly have employed a variety of different proxies
equity issues offered through an IPO. for risk, none of which seem able to explain a
It may be noted that the above is only indicative of significant portion of initial trading day returns. We
some of the factors considered in the IPO grading find evidence that several of the risk proxies used in
process and may vary on a case to case basis. these studies are outperformed by the Parkinson
 IPO grading is done without taking into account Extreme Value method in explaining returns to IPOs;
the price at which the security is offered in the hence, these studies seem to have underestimated the
IPO. Since IPO grading does not consider the explanatory power of uncertainty to predict IPO
issue price, the investor needs to make an returns. Nonetheless, we do find evidence in support
independent judgment regarding the price at of the asymmetric information theories of IPO
which to bid for/subscribe to the shares offered underpricing.
through the IPO.
 All grades obtained for the IPO along with a Craig G. D. (2000) – “Factors affecting investment
description of the grades can be found in the bank initial public offering market share”.
Prospectus. Abridged Prospectus, issue The researcher examines the effects of several factors
advertisement or any other place where the issuer on the market share of investment banks that act as
company is making advertisement for its issue. book managers in initial public offerings between
Further the Grading letter of the Credit Rating 1984 and 1995. The researcher concluded that for
Agency which contains the detailed rationale for established banks, IPO first day returns, one year
assigning the particular grade will be included abnormal performance, abnormal compensation,
among the Material Documents available for industry specialization, analyst reputation and
Inspection. association with withdrawn offer have a significant
 An IPO grade is NOT a suggestion or impact on changes in market share. These factors
recommendation as to whether one should have a more significant effect on market share
subscribe to the IPO or not. IPO grade needs to changes in low volume IPO markets. These factors
be read together with the disclosures made in the have less significant effect on market share,
prospectus including the risk factors as well as statistically and economically, for less established
the price at which the shares are offered in the banks, consistent with the notion that less reputation
issue. is placed at risk.

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 Factors Influencing Investors Investment in Initial Public Offering

M. Braun & B. Larrain (2005) – “Do Ipos Affect the public offerings (IPOs) on industry competitors and
Prices of Other Stocks? Evidence from Emerging provide evidence that companies experience negative
Markets”. The researcher study the introduction of a stock price reactions to completed IPOs in their
large asset permanently affects the prices of existing industry and positive stock price reactions to their
assets in a market. Using data from 254 IPOs in 22 withdrawal. Following a successful IPO in their
emerging markets, they find that portfolios that industry, they show significant deterioration in their
covary highly with the IPO experience a decline in operating performance. These results are consistent
prices relative to other portfolios during the month of with the existence of IPO related competitive
the issue. The effects are stronger when the IPO is advantages through the loosening of financial
issued in a market that is less integrated constraints, financial intermediary certification, and
internationally and when the IPO is bigger. This the presence of knowledge capital. These aspects of
evidence is consistent with the idea that shocks to competitiveness are significant in explaining the
asset supply have a significant effect on asset prices. cross-section of underperformance as well as survival
probabilities for competing firms.
Vichakorn C, Kennedy D. G. (2005) – “The factors
affecting on IPO return in Thai Stock Market”. The D. Kandavel (2011) - “Factors Influencing the Retail
main objective of the researchers was to study Investors to Prefer Investment in Mutual Funds In
relationship between factors and initial return of IPO Puducherry: An Empirical Study”. The researchers
by multiple regression model. The data for the study main objective was to study the factors that influence
was secondary and initial return of IPO was the rail investor to prefer investment regarding
dependent variable and the other nine variables were mutual fund in Puducherry. The study was based on
independent variable. The researchers concluded that the formulation of the following null hypotheses:
14% to 24% IPO Returns in Thai stock market in There is no significant relationship among the
given period. This figure is same with international acceptance level of the retail investors belonging to
Stock markets. In addition to that the factors affect different demographic profile towards factors
the initial return of IPOs also disclosed. By using the influencing to invest in mutual funds.The researcher
publish data that can be acquired by general investor, used statistical tools like chi square test, analysis of
the researchers investigate those data which have one-way variance, student t-test, analysis of co-
relations to the return of IPOs. efficient of variation, multiple regression analysis,
and percentage analysis have been employed. The
W. Busaba, D. Li & G. Yang (2009) – “Market researcher concluded that the small investors
Volatility and the Timing of IPO Filings”, The purchase behavior does not have a high level of
researchers investigate how aggregate IPO filing coherence due to the influence of different purchase
volume responds to changes in stock market factors.
volatility. The filing volume consists of all non-
financial firms that filed with the SEC between 1984 Leila B & Farshid A. (2014) – “Study of Factors
and 2004. Controlling for factors shown in the Affecting the Initial Public Offering (IPO) Price of
literature to impact primary market activity, notably the Shares on the Tehran Stock Exchange.” The main
stock market returns, they find filing volume objective of the researcher was to examine whether
positively related to changes in market volatility, and pricing the initial offering exchange in Tehran Stock
the relation is especially pronounced when stock Exchange is less than actual and to study the factors
market return is at „normal‟ levels, i.e. neither too that affect pricing of initial share on stock exchange.
high nor too low. The relation also holds at the The researcher for the purpose of the study included
industry level, in a pooled time-series cross-industry 115 stock exchange companies from 2006 to 2012.
regression context. The relation is more pronounced The researcher concluded that P/E variable has
for IPO filings in „new‟ industries (computers, significant relation with price changes on initial
software, electronic equipment, and offerings and had highest impact on price of initial
telecommunications) relative to traditional industries. offerings.
These results are consistent with our hypothesis that
the ability to discover investor valuations before Jog Kukies – “The Effects of Introducing a New
deciding to sell shares gives firms filing with the SEC Stock Exchange on the IPO Process”. The research
an „option‟ on the uncertain offer price. This option focused to analyzes the effect of introducing new
has value not only in a strong stock market but also in stock exchanges (New Markets) with strict disclosure
a volatile market. Furthermore, option theory implies rules on the number and characteristics of IPOs. Jorg
that the marginal effect of volatility on this option is find that the number of IPOs increases significantly
highest in „normal‟ stock markets. after the creation of such markets in a cross-section of
42 countries. Using data on privately held companies,
H. Chiahsu, A.V. Reed & J. Rocholl (2010) – “ The he find that the New Market in Germany allows
New Game in Town: Competitive Effects of Ipos”, small, young firms from industries with high research
The researcher focused to analyze the effect of initial intensity to go public.

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 Factors Influencing Investors Investment in Initial Public Offering

respondents. The respondents were approached and

Pande A, Vaidyanathan R. – “A study of Initial they were briefed about the topic and the major
Public Offerings on the National Stock Exchange of objectives of the study. The respondents were given
India”. The researchers main objective was to study adequate time to respond to the question in the
the pricing of IPOs in the NSE. The study focused to questionnaire.
empirically explain the first day under pricing in
terms of the demand generated during the book Sampling Plan:
building of the issue, the listing delay between the Population: People of Surat City investing in IPO.
closure of the book building and the first day listing Type of Sample: It is non-probability sampling. Due
of the issue and the money spent on the marketing of to the complexities of the parameters involved in the
the IPO by the firms. The researchers also attempted study the sampling methods selected by the
to study any emerging patterns in Indian IPO market researcher was convenient judgmental sampling.
with reference to the previous studies and seeks to Size of Sample: The sample size for the study is 300.
find the post IPO returns for one month in the NSE. Cost: The cost involved in this study is the time,
The researchers concluded that the demand generated questionnaire printing cost and other
for an issue during book building and the listing delay telecommunications charges.
positively impact the first day under pricing whereas
the effect of money spent on the marketing of the IPO Data Analysis:
is insignificant. The researchers also concluded that The analysis of the data includes both descriptive and
the post IPO performance in one month after the inferential statistics. The inferential statistics used in
listing for the firms under study is negative. the analysis of the primary data is factor analysis.

IV. RESEARCH METHODOLOGY Hypothesis:

 H0: There is no significant relationship between
Problem Statement: income and investment in IPO
“Factor Influencing Investors Investment in Initial  H0: There is no significant relationship between
Public Offering” investment in IPO and percentage gain
 H0: There is no significant relationship between
Research Objectives: longtime trading in stock / IPO and percentage of
 To study the purpose of investment in IPO gain from the investment
 To study the factors that influence investors to go
for IPO Benefits of the study:
 To study the problems faced by investors while  It studies the factors that affects the investment
investing in IPO in IPO
 It will help the investors to know which media is
Variables under study: effective for providing complete information
 Advertisement about IPO and which issues to be considered
 Legal Facts of the company while making investment.
 Management Efficiency
 Nature of new Projects Data Analysis:
 Planning Descriptive Statistics:
 Media new The respondents profile:
 Companies Mission and Vision  Among all respondents there are total 92
respondents who have age between 15 t0 35
Research Design years, 111 respondents have age between 35- 50
A research design is an overall framework that years and 58 respondents have age between 50-
indicates what information to be collected from 60 years and 39 respondents who have age
which sources and by which procedures. The present above 60.
study is descriptive research.  61 respondents had income is less than 100000,
66 respondents had income between 100000 to
Data Collection Plan: 200000, 105 respondents had income between
The primary data is collected for the purpose of the 200001 and 300000 and 68 respondents income
study. Primary data is collected through structured was more than 300001.
questionnaire to obtain relevant information. The  90 respondents were businessman, 87 were
survey respondents are those investors who are engineer, 52 were builder, and 71 were
investing in IPO. consultant.
 73 respondents invested less than 10000, 124
Field Procedure for Primary Data Collection: respondents invested 10001 to 50000, 70
The primary data was collected for the study. The respondents invested 50001 to 100000, 33
investors who are investing in IPO were the respondents invested above 100001.
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 Factors Influencing Investors Investment in Initial Public Offering

 72 respondents traded in stock and IPO for 0 to whereas 84 responders find IPO procedure
2 year, 134 respondents traded for 2 to 5 years, complicated and 44 respondents find it lengthy.
65 respondents traded for 5 TO 10 year and 29  Among all respondents there are total 160
respondents traded in stock and IPO for 10 year respondents are facing the difficulties related to
and above. refund problem, 39 respondents are facing the
problem related to delay in crediting allotted
The descriptive statistics revealed the following: share to the DEMAT account,57 respondents
 62 respondents invested in IPO based in the facing the difficulties related to the no clarity in
promoters image , while 82 respondents allotment and 44 respondents did not face any
invested based on the premium, 60 respondents kind of problem while investing in the IPOs.
invested based on sector performance and 92
invested based on brokers advice. Factor Analysis:
 182 respondents invest in IPO with the purpose The factor analysis was carried to identify the factors
of listing gain and 147 respondents invest in that influence the investors to invest in IPO. The
IPO with the purpose of long term gain in the KMO value of 0.783 suggests that there is adequate
IPOs. number of factors that can be extracted and again the
 35 respondents find IPO procedure easy, 137 significant value of Bartlett’s Test of Sphericity is
respondents find IPO procedure difficult 0.000 which is <0.001 so, the sample inter correlation
matrix did not come from a population in which the
inter correlation matrix is an identity matrix.

Table1: KMO and Bartlett’s Tes

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .783
Approx. Chi-Square 3521.038
Bartlett's Test of Sphericity df 990
Sig. .000

Table 2: Communalities
Initial Extraction
The quality of product and service of company affect the IPO 1.000 .648
The nature of the company have the impact on ipo 1.000 .687
The Management of the company affect the ipo 1.000 .647
The Company’s economic condition effect the ipo 1.000 .756
The Future planning of the company affect the ipo 1.000 .569
The news of the company affect the ipo 1.000 .530
The company milestone effect the ipo 1.000 .518
The Mission and Vision of the company effect the ipo 1.000 .485
The Financial condition of the company effect the ipo 1.000 .688
Experience of the company in the corporate world effect the ipo 1.000 .651
The Problems that company faces in corporate is affect the ipo 1.000 .647
The Company future forecasting ability affect the ipo 1.000 .654
Leadership quality of the top management of company is affect the ipo 1.000 .760
Planning of the project effect the ipo 1.000 .569
Decision making ability of the company effect the ipo 1.000 .552
the fact about the company affect the ipo 1.000 .658
Judgments on the legal fact of the company is effect the ipo 1.000 .635
There is a impact of the legal fact on the ipo 1.000 .584
Financial statement of the company affect the ipo 1.000 .562
Is the company Turnover of the product’s is effect the ipo 1.000 .684
Cash flow condition in the company effect the ipo 1.000 .577
Company Future Prediction effect the ipo 1.000 .543
Company analytical ability affect the company ipo 1.000 .715
Company future prediction related to economy and financial position of the country affect
1.000 .664
the ipo
Planning related to quality of the product and services of the company effect the ipo 1.000 .685
Is the company quality control technique effect the ipo 1.000 .619
Is the company quality assurance of the company effect the ipo 1.000 .684
the Company’s corporate governance affect the ipo 1.000 .592
the Company corporate ethics affect the ipo 1.000 .635

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 Factors Influencing Investors Investment in Initial Public Offering

Capital budgeting of the company for the IPO is well 1.000 .540
the Investors educated is affect the ipo of the company 1.000 .569
State’s law Differentiate the company’s financial condition for the ipo 1.000 .670
Rules and regulations of the company are affect the ipo 1.000 .526
comment in media for risk associate with company is affect the ipo 1.000 .686
the comment in the media affect the listing price of the Share 1.000 .695
the comment in media having impact on pricing of the new issue 1.000 .588
the legitimacy effect the income level of the investor of the ipo 1.000 .469
the gap of the performance have effect the ipo performance 1.000 .573
the governance of the company affect the ipo 1.000 .579
the stake holder group of the company affect ipo of the company 1.000 .586
the size of the board of the company affect the ipo 1.000 .688
the voting power of the share holder affect at the time of ipo 1.000 .598
Nature of the new project affect the company ipo 1.000 .665
Total investment of the company in the new project affect the ipo 1.000 .700
The Uncertainty in financial markets affect the company ipo 1.000 .582

Table 3: Total Variance Explained

Extraction Sums of Squared Rotation Sums of Squared
Initial Eigenvalues
Loadings Loadings
Component
% of Cumulative % of Cumulative % of Cumulative
Total Total Total
Variance % Variance % Variance %
1 6.832 15.183 15.183 6.832 15.183 15.183 6.234 12.595 12.595
2 3.848 8.552 23.735 3.848 8.552 23.735 3.178 7.062 19.656
3 1.849 4.108 27.843 1.849 4.108 27.843 1.769 3.931 23.587
4 1.796 3.992 31.835 1.796 3.992 31.835 1.683 3.739 27.327
5 1.567 3.483 35.318 1.567 3.483 35.318 1.614 3.587 30.914
6 1.454 3.231 38.549 1.454 3.231 38.549 1.612 3.581 34.495
7 1.380 3.068 41.617 1.380 3.068 41.617 1.534 3.409 37.904
8 1.324 2.942 44.559 1.324 2.942 44.559 1.516 3.369 41.273
9 1.262 2.805 47.364 1.262 2.805 47.364 1.440 3.200 44.474
10 1.214 2.697 50.060 1.214 2.697 50.060 1.377 3.061 47.535
11 1.193 2.652 52.713 1.193 2.652 52.713 1.358 3.018 50.552
12 1.123 2.496 55.209 1.123 2.496 55.209 1.322 2.937 53.489
13 1.047 2.327 57.536 1.047 2.327 57.536 1.296 2.880 56.369
14 1.018 2.263 59.799 1.018 2.263 59.799 1.296 2.879 59.249
15 1.004 2.231 62.030 1.004 2.231 62.030 1.251 2.781 62.030
16 .950 2.111 64.141
17 .903 2.006 66.147
18 .895 1.988 68.135
19 .855 1.900 70.035
20 .850 1.888 71.923
21 .795 1.767 73.690
22 .790 1.755 75.445
23 .742 1.650 77.095
24 .709 1.575 78.670
25 .704 1.564 80.233
26 .664 1.475 81.708
27 .637 1.415 83.123
28 .618 1.373 84.495
29 .597 1.326 85.821
30 .560 1.245 87.067
31 .550 1.223 88.290
32 .507 1.126 89.416
33 .485 1.077 90.493
34 .475 1.055 91.548
35 .432 .961 92.509
36 .417 .926 93.435

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 Factors Influencing Investors Investment in Initial Public Offering

37 .412 .915 94.350

38 .399 .886 95.236
39 .366 .814 96.050
40 .356 .791 96.841
41 .326 .724 97.565
42 .312 .694 98.259
43 .296 .657 98.916
44 .263 .585 99.501
45 .225 .499 100.000

Figure 1:

The scree plot is a graph of the eigenvalues against all the factors. The graph is useful for determining how
many factors to retain. The point of interest is where the curve starts to flatten. It can be seen that the curve
begins to flatten between factors 3 and 4. So there are major three factors.

The table below shows the loadings of the 23 variables on the 15 factors extracted. The higher the absolute
value of the loading, the more the factor contributes to the variable. The gap on the table represent loadings that
are less than 0.5, this makes reading the table easier.

Table 4: Rotated Component Matrix

Component
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Factor_1 .782
Factor_2
Factor_3
Factor_4 .844
Factor_5
Factor_6 .592
Factor_7
Factor_8
Factor_9 .776
Factor_10 .631
Factor_11 .710
Factor_12
Factor_13 .792
Factor_14 .603
Factor_15
Factor_16 .716
Factor_17 -.616
Factor_18
Factor_19
Factor_20 .653
Factor_21 .647

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 Factors Influencing Investors Investment in Initial Public Offering

Factor_22
Factor_23 .787
Factor_24 .754
Factor_25 .623
Factor_26 .589
Factor_27 .668
Factor_28 .526
Factor_29 .552
Factor_30 .527
Factor_31 .621
Factor_32 .563
Factor_33 .650
Factor_34 .761
Factor_35 .504
Factor_36 .706
Factor_37 .527
Factor_38 .589
Factor_39 .562
Factor_40 .569
Factor_41 .704
Factor_42 .612
factor_43 .764
factor_44 -.795
factor_45
Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization.
a. Rotation converged in 23 iterations.

The factor analysis reveals that there are three major factors that influence the investors to invest in IPO. The
three major factors are Company Philosophy, Future Prediction and Projection, News relating to company IPO
and Financial Performance.

Hypothesis
H0: There is no significance relationship between income and invest in IPOs.
H1: There is significance relationship between income and invest in IPO’s.

Table 5: Chi-square tests

Value df Asymp. Sig. (2-sided)
Pearson Chi-Square 19.939a 9 .018
Likelihood Ratio 22.620 9 .007
Linear-by-Linear Association 12.544 1 .000
N of Valid Cases 300
a. 0 cells (.0%) have expected count less than 5. The minimum expected count is 6.71.

The above table indicates that as the p-value is 0.018 which is less than 0.05 at 5% level of significance we
reject the null hypothesis. Thus, there is association between income and invest in IPOs.

H0: There is no significance relationship between invest in IPOs and percentage gain from the IPO listing.
H1: There is no significance relationship between invest in IPOs and percentage gain from the IPO listing.
Table 6: Chi-square tests
Value df Asymp. Sig. (2-sided)
Pearson Chi-Square 5.904a 9 .750
Likelihood Ratio 6.038 9 .736
Linear-by-Linear Association .177 1 .674
N of Valid Cases 300
a. 0 cells (.0%) have expected count less than 5. The minimum expected count is 5.61.

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 Factors Influencing Investors Investment in Initial Public Offering

The above table reveals that the p-value is 0.750 which is greater than 0.05 at 5% level of significance, so we
fail to reject the null hypothesis. Thus, there is no association between investment in IPO and percentage of gain
from IPO Listing.

H0: There is no significance relationship between longtime trading in stock/IPO and percentage gain from the
investment.
H1: There is no significance relationship between longtime trading in stock/IPO and percentage gain from the
investment.

Table 7: Chi-Square tests

Value df Asymp. Sig. (2-sided)
Pearson Chi-Square 7.335a 9 .602
Likelihood Ratio 6.998 9 .637
Linear-by-Linear Association .196 1 .658
N of Valid Cases 300
a. 1 cells (6.3%) have expected count less than 5. The minimum expected count is 4.93.

The table states that the p-value is 0.602 which is greater than 0.05 at 5% level of significance, we fail to reject
the null hypothesis. Thus, there is no association between longtime trading in stock/IPO and percentage gain
from the investment.

CONCLUSION [2] Hsu, H., A.V. Reed, and J. Rocholl (2009) – “The New
Game in Town: Competitive Effects of IPOs, Journal of
Finance.
The analysis of the data reveals that majority of the [3] J. D. Knopf & J. L. Teall (1999) – “The IPO Effect and
investor’s takes broker’s advice while investing in Measurement of Risk”. Journal of Financial and Strategic
IPO. The analysis also states that 182 respondents Decisions, Volume 12, Number 2, pp. 51-58
[4] Jog Kukies – “The Effects of Introducing a New Stock
invest in IPO to benefit from listing gain. It can be
Exchange on the IPO Process”. http://biva.com.mx/wp-
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