A systematic review & bibliometric analysis

Abstract

The initial public offering (IPO) is one of the vital decisions that need to be made by an unlisted firm. The number of companies transform to public through an initial public offering has been growing significantly in recent years. The phenomenon of IPO underpricing has been reported not only in developed markets such as the United States but in almost every stock market around the globe. Although the magnitude of underpricing varies from country to country. The empirical evidence shows the degree of underpricing is relatively more in developing nations than in developed nations. The main objective of this study is to answer some of the pertinent questions like what are the costs associated with going public?, what theoretical models can explain such puzzling variation in the underpricing across the globe?, what are the key determinants of underpricing?, along with that, the present research trying to identify the difference between the short-term and long-term performance of an IPO firm? Additionally, this paper offers a dual perspective on the current state of IPO underpricing literature. This study synthesizes the corpus of IPO underpricing literature published throughout 2007- 2021 by adopting the PRISMA (Preferred Reporting Items for Systematic reviews and Meta- Analysis) methodology along with bibliometric analysis. The bibliometric analysis highlights important aspects of the existing literature, including leading journals, top-cited articles, authors, research streams, variables, and other aspects. Based on this review, it has been found that the ‘information asymmetry problem’ between the key IPO participants is the primary cause of the high level of underpricing, particularly in developing nations. The theories based on the asymmetric information problem provide the most compelling explanation for the phenomena of underpricing. These theories include ex-ante uncertainty, signaling, certification, and the entrepreneurial wealth loss model.