INVESTOR EXPECTATIONS ON ‘RETURN’ AND ‘TRUST’ ON IPO GRADING: AN EMPIRICAL ANALYSIS

Oversubscription during IPO is the result of demand over supply due to investors’ keen interest and expectation to subscribe new shares. Grading agencies play a major role in attracting investors to subscribe shares during IPO. This is due to the ‘trust’ that investors have on the grading agency, regarding its capability to perform research on the key fundamental indicators. Informed and knowledgeable investors act vigorously to get maximum shares during the initial public offer. Book building pricing method plays vital role in attracting the investors who anticipate efficient price discovery. The study attempts to provide insights to investors on how significantly efficient the listing prices of oversubscribed shares between 1 to 5 grades by approved rating agencies are; as well as the profitability in investing oversubscribed IPOs with respect to the 1) Close price of the listing day 2) Short term and 3) Long term returns in both manufacturing and service sector.