Pre-market individual investors’ sentiment and IPO initial performance of the emerging market

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Abstract

The volatility of the initial return and trading volume is evident from early observations of the Malaysian initial public offering (IPO) market on the first trading day. Making informed investment decisions is essential for a more accurate assessment of businesses and capital security. Investors should therefore be aware of what influences IPO initial return and trading volume. However, only a few amounts of prior research on the initial return and trading volume on the first trading day of an IPO has focused on the issue of investors’ reaction. Specifically, previous studies have not taken into consideration how individual investors feel about IPO companies as the primary influence. In this study, the sentiment of individual investors is measured using the Google Search Volume Score (GSVS), a practical approximation (Da et al., 2011). This is because most people who use Google to look up information, particularly about recently released equities, are individual investors. Between 2004 and 2020, 271 initial public offerings (IPOs) listed on Bursa Malaysia’s Main Market and Access, Certainty, Efficiency (ACE) Market made up the study sample. This study demonstrated that pre-market investor sentiment significantly and favourably effects IPO initial return and trading volume on the first trading day based on ordinary least square regression (OLS) models.

Keywords: Google Search Volume Score, Initial Public Offering, IPO Initial Return, IPO Trading Volume, Pre-Market Individual Investors’ Sentiment

Authors’ individual contribution: Conceptualization — N.C.-Y., S.S.S., and N.L.M.-E.; Methodology — N.C.-Y., S.S.S., and N.L.M.-E.; Data Curation — N.C.-Y., S.S.S., and N.L.M.-E.; Writing — Original Draft — N.C.-Y., S.S.S., and N.L.M.-E.; Writing — Review & Editing — N.C.-Y., S.S.S., and N.L.M.-E.

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

Acknowledgements: The Authors would like to acknowledge that this article is part of a research project funded by the Faculty of Business and Management, Universiti Teknologi MARA (UiTM), Malaysia (600-TNCPI 5/3/DDF (FPP) (010/2021)).

JEL Classification: G12, G40, G41

Received: 26.04.2022
Accepted: 11.01.2023
Published online: 13.01.2023

How to cite this paper: Che-Yahya, N., Saleh, S. S., & Md-Elias, N. L. (2023). Pre-market individual investors’ sentiment and IPO initial performance of the emerging market. Corporate Governance and Organizational Behavior Review, 7(1), 8–17. https://doi.org/10.22495/cgobrv7i1p1