Ownership Retention, Number Of Risk Factors And Underpricing In Indonesian Initial Public Offerings

Tatang A Gumanti and Marentin Nita Niagara
University of Jember
Abstract

This study examines whether the level of ownership retained by the issuers of IPO and the number of risk factors available in the issue prospectus are associated with the variation of the level of underpricing. Using a sample of 288 IPOs that went public between 1990 and 2004 in Indonesian capital market, this study finds that the level of ownership retention has negative correlation with the level of underpricing.
In line with the expectation, this study finds that the number of risk factors is positively related to the level of underpricing. This finding implies that the riskier the IPO firm as indicated by the number of risk factors, the higher the level of underpricing.
Keywords: underpricing, ownership retention, number of risk factors, initial public offerings.

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