Journal Press India^®

Author Details ( * ) denotes Corresponding author

The going public strategy of entrants through the issuance of IPOs possess a bidirectional association with the prevailing economic conditions. To be more specific, the launch of new IPO depends on the macroeconomic fundamentals of an emerging economy and also determines the later. The presents paper attempts to empirically investigate the impact of macroeconomic variables on the frequency and volume Indian IPOs. To fulfil the purpose of our study, a sample size of 1227 Indian IPOs issued during the period 2012 to 2023 is considered. It turns out that CPI, exchange rate and uncertainty have significant adverse impact on the performance of Indian IPOs whereas liquidity has some favourable influence. CPI and IIP have bidirectional causal association with both the frequency and volume of IPOs launched during the study period. Additionally, it is observed that there exist different short-run dynamic adjustment mechanisms between the key macroeconomic factors and IPOs.

Keywords

Initial Public Offerings (IPOs); IPOs activities; Macroeconomic determinants; ARDL bound cointegration test; Variance decomposition

1. Ameer, R. (2012). Macroeconomic factors and initial public offerings (IPOs) in Malaysia. Asian Academy of Management Journal of Accounting and Finance, 8(1), 41–67.
2. Amorim, D., Camargos, M. & Ferreira, C. (2021). Macroeconomic factors and initial public offerings in Brazil. Global Business Review, 25(6), 1–18.
3. Angelini, E. & Foglia, M. (2018). The relationship between IPO and macroeconomic factors: An empirical analysis from UK market. Annals of Economics and Finance, 19(1), 319-336.
4. Chang, K. P. (2009). Do macroeconomic variables have regime-dependent effects on stock return dynamics? Evidence from the Markov regime-switching model. Economic Modelling, 26, 1283–1299.
5. Cowan, L. (2006, October 2). Stock market quarterly review: Companies hit brakes on IPOs; economy, oil-price worries soften new-issue demand; Europe bucks weak trend. Wall Street Journal (Eastern edition).
6. Dickey, D. A. & Fuller, W. A. (1981). Likelihood ratio statistics for autoregressive time series with a unit root. Econometrica, 49(4), 1057–1072.
7. Gera, P. (2019). Do macroeconomic variables impact number of IPOs in India? International Refereed Journal of Reviews and Research, 7(3), 190-198.
8. Gleason, K. C., Johnston, J. & Madura, J. (2008). What factors drive IPO aftermarket risk? Applied Financial Economics, 18(13), 1099–1110.
9. Hussain, M. & Goswami, B (2022), Sector specific determinants of foreign portfolio investment inflows in India: A panel ARDL approach. Global Business Review. Retrieved from https://doi.org/10.1177/09721509221137204
10. Hussain, M. & Goswami, B. (2022). Foreign portfolio investment in India: Trends and determinants. Research Bulletin, 47(3-4), 71–88.
11. Jalil, A. & Mahmud, S. F. (2009). Environmental Kuznets curve for CO₂ emissions: A cointegration analysis for China. Energy Policy, 37, 5167–5172.
12. Ljungqvist, A. (1995). When do firms go public? Poisson evidence from Germany (Working paper). University of Oxford.
13. Loughran, T., Ritter, J. R. & Rydqvist, K. (1994). Initial public offerings: International insights. Pacific-Basin Finance Journal, 2(2-3), 165–200.
14. Lowry, M. (2003). Why does IPO volume fluctuate so much? Journal of Financial Economics, 67(1), 3–40.
15. Meluzín, T. & Zinecker, M. (2014). Macro- and microeconomic aspects of going public in the Czech Republic and Poland. Procedia - Social and Behavioral Sciences, 156, 558–563. Retrieved from https://doi.org/10.1016/j.sbspro.2014.11.240
16. Mustafa, O. & Esin, B. A. (2022). Macro-economic determinants of the IPO waves: An assessment of G-7 countries. Retrieved from https://f1000research.com/articles/11-763/v2
17. Pagano, M., Panetta, F. & Zingales, L. (1998). Why do companies go public? An empirical analysis. Journal of Finance, 53(1), 27–64.
18. Pástor, L. & Veronesi, P. (2005). Rational IPO waves. Journal of Finance, 60(4), 1713–1757.
19. Pástor, L. & Veronesi, P. (2009). Entrepreneurial learning, the IPO decision, and the post-IPO drop in firm profitability. Review of Financial Studies, 22(8), 3005–3046.
20. Pesaran, M. H. & Smith, R. P. (1998). Structural analysis of cointegrating VARs. Journal of Economic Surveys, 12(5), 471–505.
21. Pesaran, M. H., Shin, Y. & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16, 289–326. Retrieved from https://nomanarshed.wordpress.com/wp-content/uploads/2013/10/ardl-with-cointegrating-bounds-1.pdf
22. Rees, W. (1997). The arrival rate of initial public offers in the UK. European Financial Management, 3(1), 45–62.
23. Ritter, J. R. & Welch, I. (2002). A review of IPO activity, pricing, and allocations. Journal of Finance, 57(4), 1795–1828.
24. Tran, H. & Jeon, B. N. (2011). The dynamic impact of macroeconomic factors on initial public offerings: Evidence from time-series analysis. Applied Economics, 43(23), 3187-3201.
25. Zingales, L. (1995). Inside ownership and the decision to go public. Review of Economic Studies, 62(3), 425–448.