Investment decisions in initial public offerings and over-subscription perceptions among investors

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Abstract

This study aims to address the critical issue of inadequate research policies in the context of growing interest in initial public offerings (IPOs). Its primary objective is to explore the complex dynamics governing IPO investment decisions and the over-subscription perceptions among Nepalese investors. It employs a quantitative research design and a questionnaire administered to 150 respondents. It adopts a theoretical framework that includes firm-specific and general factors, aligning with Velmurugan et al.’s (2015) perspective. The findings demonstrate that factors, including the corporate profile, financial position, IPO size, short-term returns, market rumors, goodwill, and sector performance, significantly influence IPO investment decisions among Nepalese investors. These findings emphasize the pivotal role of a company’s financial health for both short-term and long-term investment gains (Ferdous et al., 2021). Investors prioritize corporate profile, financial position, and short-term returns when making IPO investment decisions. This research contributes to better-informed decision-making for investors, assists IPO-issuing companies in increasing their attractiveness, and offers guidance to regulatory bodies in ensuring transparency in financial information. This study’s relevance lies in its contribution to improving IPO investment decisions, thereby benefiting investors, companies, and regulatory bodies in the context of the Nepalese stock market.

Keywords: Initial Public Offerings, IPO Decision Factors, Over-Subscription, Investment Behavior, Investment Decision-Making, Stock Market

Authors’ individual contribution: Conceptualization — D.K.; Methodology — D.K. and G.B.; Software — D.K. and R.K.D.; Validation — D.K., G.B., and R.K.D.; Formal Analysis — G.B. and N.S.; Investigation — D.K. and R.K.D.; Resources — G.B. and R.K.D.; Data Curation — R.K.D. and N.S.; Writing — Original Draft — D.K.; Writing — Review & Editing — D.K., G.B., and R.K.D.; Visualization — D.K., G.B., and N.S.; Supervision — G.B., R.K.D., and N.S.; Project Administration — G.B.; Funding Acquisition — D.K., G.B., R.K.D., and N.S.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G10, G11, G24, G41

Received: 26.08.2023
Accepted: 26.01.2024
Published online: 29.01.2024

How to cite this paper: Karki, D., Bhattarai, G., Dahal, R. K., & Sanjel, N. (2024). Investment decisions in initial public offerings and over-subscription perceptions among investors. Corporate Governance and Organizational Behavior Review, 8(1), 105–114. https://doi.org/10.22495/cgobrv8i1p9