IPO Underpricing Phenomenon Analysis: the Impact of Fear Covid-19 and Post Covid-19 IPO Stock Performance in Regional ASEAN Countries

Abstract

The COVID-19 pandemic has had a significant impact on capital markets in ASEAN-5 countries (Indonesia, Malaysia, Thailand, the Philippines and Singapore), including the phenomenon of underpricing in initial public offerings (IPO). This research analyzes the influence of the COVID-19 Fear Index, company characteristics, IPO characteristics, and macroeconomic factors on underpricing and its impact on the long-term performance of IPO shares as measured using Buy and Hold Abnormal Return (BHAR) for one year in the period January 30, 2020 - May 5, 2023. A total of 303 companies were selected using the purposive sampling method. Data analysis was carried out using the Ordinary Least Squares (OLS) method, with winsorizing at the 5% and 95% levels and eliminating outliers based on a residual standard deviation of more than 3. The results of the study showed that the Fear Index had a negative effect on underpricing. In terms of company characteristics, Return on Assets (ROA) has a positive effect on underpricing and BHAR, while company size only has a positive effect on BHAR. For IPO characteristics, Public Ownership has a positive effect on underpricing, while Offer Size has a negative effect on BHAR. In the macroeconomic aspect, GDP per capita growth has a negative effect on underpricing, and interest rates have a negative effect on BHAR. In addition, underpricing has a significant negative effect on BHAR, indicating that low initial stock prices can affect long-term performance. This research emphasizes the importance of considering various factors in IPO analysis during the crisis. It is recommended for further research that underpricing be used as an intervening variable and use a fixed effect model per country, as well as deepen the analysis of underwriter reputation by considering differences in regulations between countries.