Influence of institutional ownership and leverage towards the liquidity of IPOs

The aim of this study was to examine the influence of institutional ownership and leverage towards the aftermarket liquidity of 65 initial public offering (IPOs) that are listed on Bursa Malaysia, an emerging stock market in the South East Asia, from January 2011 to December 2015. This study begins...

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Main Author:	Muhammad Muslim, Samsudin
Format:	Thesis
Language:	eng eng
Published:	2017
Subjects:	HJ Public Finance
Online Access:	https://etd.uum.edu.my/7578/1/s820039_01.pdf https://etd.uum.edu.my/7578/2/s820039_02.pdf
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id	my-uum-etd.7578
record_format	uketd_dc
institution	Universiti Utara Malaysia
collection	UUM ETD
language	eng eng
advisor	Mohd Rashid, Rasidah
topic	HJ Public Finance
spellingShingle	HJ Public Finance Muhammad Muslim, Samsudin Influence of institutional ownership and leverage towards the liquidity of IPOs
description	The aim of this study was to examine the influence of institutional ownership and leverage towards the aftermarket liquidity of 65 initial public offering (IPOs) that are listed on Bursa Malaysia, an emerging stock market in the South East Asia, from January 2011 to December 2015. This study begins from January 2011 to avoid the effects of the Global financial crisis in 2008. The data collected using the prospectus of the companies. The hypothesized effects are on liquidity based on the trading and signal and adverse selection theories. Trading and signal theory posits that institutional ownership contributes to higher level of aftermarket liquidity while adverse selection is vice versa. Trading volume is being used as a proxy of the liquidity of the stocks. Cross-section regression method is conducted to investigate the effects of institutional ownership and leverage on the liquidity of newly listed shares. The result indicates relationship between private institutional ownership and the liquidity of IPOs is insignificant. However after interacts the institutional ownership and leverage using multiplication of the both independent variables using centering mean the result shows impact of institutional ownership on liquidity of IPOs is significantly negative. The negative relationship show trading based on private information will deteriorate information asymmetry, thus will increase the adverse selection costs and eventually will decrease stock market liquidity. For leverage the result is negatively significant associate with liquidity as firms with high leverage signaling negative for investors since if firms need to finance a new project then new external financing will be needed accordingly the agency cost also increase. The significance of the study is to help the firm and investors to strategize their investment strategy as liquidity is important aspects in investment.
format	Thesis
qualification_name	other
qualification_level	Master's degree
author	Muhammad Muslim, Samsudin
author_facet	Muhammad Muslim, Samsudin
author_sort	Muhammad Muslim, Samsudin
title	Influence of institutional ownership and leverage towards the liquidity of IPOs
title_short	Influence of institutional ownership and leverage towards the liquidity of IPOs
title_full	Influence of institutional ownership and leverage towards the liquidity of IPOs
title_fullStr	Influence of institutional ownership and leverage towards the liquidity of IPOs
title_full_unstemmed	Influence of institutional ownership and leverage towards the liquidity of IPOs
title_sort	influence of institutional ownership and leverage towards the liquidity of ipos
granting_institution	Universiti Utara Malaysia
granting_department	Othman Yeop Abdullah Graduate School of Business
publishDate	2017
url	https://etd.uum.edu.my/7578/1/s820039_01.pdf https://etd.uum.edu.my/7578/2/s820039_02.pdf
_version_	1747828237372751872
spelling	my-uum-etd.75782021-05-10T07:01:34Z Influence of institutional ownership and leverage towards the liquidity of IPOs 2017 Muhammad Muslim, Samsudin Mohd Rashid, Rasidah Othman Yeop Abdullah Graduate School of Business Othman Yeop Abdullah Graduate School of Business HJ Public Finance The aim of this study was to examine the influence of institutional ownership and leverage towards the aftermarket liquidity of 65 initial public offering (IPOs) that are listed on Bursa Malaysia, an emerging stock market in the South East Asia, from January 2011 to December 2015. This study begins from January 2011 to avoid the effects of the Global financial crisis in 2008. The data collected using the prospectus of the companies. The hypothesized effects are on liquidity based on the trading and signal and adverse selection theories. Trading and signal theory posits that institutional ownership contributes to higher level of aftermarket liquidity while adverse selection is vice versa. Trading volume is being used as a proxy of the liquidity of the stocks. Cross-section regression method is conducted to investigate the effects of institutional ownership and leverage on the liquidity of newly listed shares. The result indicates relationship between private institutional ownership and the liquidity of IPOs is insignificant. However after interacts the institutional ownership and leverage using multiplication of the both independent variables using centering mean the result shows impact of institutional ownership on liquidity of IPOs is significantly negative. The negative relationship show trading based on private information will deteriorate information asymmetry, thus will increase the adverse selection costs and eventually will decrease stock market liquidity. For leverage the result is negatively significant associate with liquidity as firms with high leverage signaling negative for investors since if firms need to finance a new project then new external financing will be needed accordingly the agency cost also increase. The significance of the study is to help the firm and investors to strategize their investment strategy as liquidity is important aspects in investment. 2017 Thesis https://etd.uum.edu.my/7578/ https://etd.uum.edu.my/7578/1/s820039_01.pdf text eng public https://etd.uum.edu.my/7578/2/s820039_02.pdf text eng public other masters Universiti Utara Malaysia Abdul-Rahim, R. and Yong, O. (2008), “Initial returns of Shariah-compliant IPOs in Malaysia”, Capital Market Review, Vol. 16 No. 2, pp. 270-279. Acharya, V. V., & Pedersen, L. H. (2005). Asset pricing with liquidity risk. Journal of Financial Economics, 77, 375-410 Aggarwal, R., & Rivoli, P. (1990). Fads in the initial public offering market? 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Influence of institutional ownership and leverage towards the liquidity of IPOs

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