Price Band, Offer Price Adjustment and Initial Listing Returns: Evidence from the Indian IPO Market

Extant research on developed markets shows that investor sentiment plays a prominent role in IPO markets. There is sparse work in the context of emerging markets. We fill this lacuna by studying the Indian IPO market. We examine the determinants of offer price band and its influence on offer price adjustment and subsequent listing performance. Offer price band is a crucial component of the book building process and has not been studied in the context of emerging markets. Our work fills this void. We hypothesise that retail demand which is a proxy for investor sentiment will positively influence offer price band. We also posit that the profitability of a firm will be inversely related to offer price band. Our empirical tests support these hypotheses. We also find that offer price adjustment is positively related to offer price band.