The Hot Issue Market in Nepal (Journal of Business and Social Sciences Research)

Summary

• The study analyzes a sample of 202 initial public offerings (IPOs) issued in the Nepali stock market between 2011/12 and 2022/23 out of 246 total offerings.p.6
• The sample demonstrates a mean annual IPO volume of 16.83 offerings, with a maximum of 26.00 offerings in a single year.p.9
• The binary logit regression model achieved a Nagelkerke R-square of 80.5% and an overall classification accuracy rate of 90.6%.p.14

Key insights

1. The microfinance sector is the only industry in Nepal meeting all three hot issue criteria of above-average volume, initial returns, and subscription rates.p.1
2. IPO issuance in Nepal is heavily concentrated in three sectors: hydropower with 77 offerings, microfinance with 65 offerings, and development banks with 32 offerings.p.10
3. Underpricing measured by market-adjusted abnormal return has a statistically significant positive effect on the probability of an IPO taking place in a hot market.p.15
4. Gross domestic product growth significantly increases the likelihood that firms will issue IPOs during a hot market state.p.16
5. Underwriter size does not significantly influence a firm's decision to go public during a hot issue market in Nepal.p.16