Exploration of IPO Motives, Oversubscription and Flotation Costs: Evidence from Bangladesh

This study intended to explore the IPO motives and the factors that contributed to IPO oversubscription in Bangladesh. Based on hand-collected data from ۱۰۱ sample IPO prospectus during ۲۰۱۰–۱۹, the study found an average of ۱۰ IPOs per year, mostly (۹۰%) through the fixed-price method. Among the sample companies, ۳۴.۷% were in the textile sector, followed by ۱۷.۸% in the engineering sector and ۱۲.۹% in the pharmaceuticals & chemical sector. This study observed an average subscription times of ۲۳.۴۱, which was much lower than in some other South Asian countries. Regarding the use of IPO proceeds, loan settlement was the prime motive, followed by capital expenditure, and working capital financing. Companies expensed around ۶% of the total IPO proceeds as flotation cost. Although the detailed disclosure of the use of IPO proceeds in the prospectus is a common and expected feature, it was found absent in around ۱۲% of companies. The logistic regression model found a statistically significant influence of lot size (LOT), post-IPO capital (PIC), and flotation cost (FTC) on oversubscription times (OST). The contribution of FTC to OST was a novel finding of this study. The study also found the absence of large and reputed domestic and multinational conglomerates in the listing through IPOs. Thus, the current study recommends regulators should take proper drives to customize and familiarize the book-building method, which can entice good companies for listing in stock exchanges through IPO.

کلیدواژه ها:

IPO motives ، primary market ، Book-building ، IPO proceed utilization ، Bangladesh capital market