Published Online:October 2025
Product Name:The IUP Journal of Applied Finance
Product Type:Article
Product Code:IJAF011225
DOI:10.71329/IUPJAF/2025.31.4.5-23
Author Name:Nischay Arora
Availability:YES
Subject/Domain:Finance
Download Format:PDF
Pages:5-23
The paper seeks to explore the determinants of underpricing of SME IPOs in an emerging economy like India, characterized by huge information asymmetry and uncertainty. Employing a sample of 952 SME IPOs issued between February 2012 and March 2024, and listed on BSE SME platform and NSE EMERGE, logistic regression is applied to investigate the determinants of underpricing. The main findings reveal that while issue price, market return and hot market reduce the likelihood of underpricing of SME IPOs, underwriter reputation and oversubscription increase the probability that SME IPOs are underpriced. The study has implications for issuers, investors and regulators. For issuers, the study is helpful in identifying the determinants that reduce the likelihood of their shares being underpriced. In a similar vein, the findings would help the investors to discount these factors while taking fruitful investment decisions. In addition, the study may help regulators oversee the efficiency of any other alternative (SME) stock market in emerging economy with similar institutional traits and regulations. This study is unique as it is one of the first to examine the determinants of underpricing of SME IPOs using logistic regression in the underexplored settings of Indian economy.
Worldwide integration of global economy is harbingering a change in the landscape of financial infrastructure with entrepreneurial finance being the prerogative for financial policymakers across the globe (Nichkasova, 2018)