An Empirical Investigation Of Underpricing In Vietnamese IPOs

The Vietnamese stock market was founded later than of other countries in the world,yet has been turning into one of most rapid growth markets in South East Asia,since the establishment of the National Securities Commission at the end of 1986.Thanks to many valuable experiences gained in the past 30 years,the Vietnamese stock market has gradually been strengthened and become an essential part of the global securities market with its vast potential.Its dynamic development and sophisticated characteristics require more in-depth research,which will not only be helpful for the Vietnamese market but also the stability of the global financial system.Even though there are many research about IPO underpricing,which generate various significant results,there is still a very limited number of these researches that based on the Vietnamese stock market.Furthermore,most of them have not well explored the root causes of IPO underpricing,which consequently leads to the lack of an appropriate measurement method for the level of IPO underpricing in VietnamThe sample of this thesis is 69 companies whose IPOs were listed on the Hanoi Stock Exchange(HNX)and the Ho Chi Minh Stock Exchange(HOSE).The design of the regression model of this research was built based on previous research,which takes eight variables into consideration: oversubscription rate,state ownership rate,initial price,size of the company,age of the company,listing time lag,corporate risk,and market conditions.Then,OLS and bootstrap methods will be utilised to analyse the impact of each variable on the level of IPO underpricing level.The result of the analysis has confirmed that there is IPO underpricing in the Vietnamese stock market;financial services companies have a lower level of IPO underpricing than the non-financial service ones.Specifically,the result in the regression analysis has shown that there are three factors that negatively correlated with the level of IPO underpricing,which are the oversubscription rate and the initial price,impact of market conditions appeared relatively weak,while the other four variables do not have any impact on the level of IPO underpricing.This result is relatively different from other research of the same topic for developing markets.Therefore,the recommendation of using the book building method as a substitute for auctioning method are made.Moreover,regulations about the maximum interval of time between IPO and listing must be issued to prevent extremely high bids that may distort issue prices and enhancing responsibility for financial disclosure among issuers.