Abstract:
The mispricing of IPOs has been widely examined in studies. According most research findings, IPOs on average, are under priced in the short-run and correctly priced in the long-run. The purpose of this paper is to prove how the underpricing of IPOs on the London Stock Exchange is affected by issue size, firm age, systematic risk, underwriter reputation, P/E ratio, debt ratio, and ROA. Research has found the degree of underpricing on the London Stock Exchange market is 6.89744%.
The result of this research reveals that issue size, systematic risk, and debt ratio influence the underpricing of IPOs. The large volume of issue size usually contributes to a lower degree of underpricing. The systematic risk and debt ratio result to a higher degree of underpricing. Thus, there exists a positive relationship between IPOs and systematic risk & debt ratio. Actually, because of the limitation of this research, the test result may not be accurately for IPOs forecast on the London Stock Exchange.