The Influence of Pre-IPO Firm Size and Profitability on Underpricing with Underwriter Reputation as a Moderating Variable (Journal of Islamic Economics and Finance)

Summary

• The regression model generated an Adjusted R² value of 0,197, demonstrating that pre-IPO firm size and profitability explain 19,7% of the variance in underpricing.p.1
• Pre-IPO firm size demonstrated a statistically significant positive effect on underpricing with a coefficient of 0,295 and a t-value of 3,997.p.6
• Pre-IPO profitability exhibited a statistically significant positive effect on underpricing with a coefficient of 0,257 and a t-value of 3,489.p.7

Key insights

1. Pre-IPO firm size exerts a positive and statistically significant impact on stock underpricing during initial public offerings on the Indonesia Stock Exchange.p.6
2. Pre-IPO profitability positively affects underpricing, as stronger financial performance signals operational stability and drives primary market stock demand.p.7
3. Underwriter reputation does not significantly moderate the influence of pre-IPO firm size on underpricing levels.p.7
4. Underwriter reputation does not act as a moderating variable in the relationship between pre-IPO profitability and stock underpricing.p.7
5. The study sample excluded 60 non-underpriced companies, 18 companies without positive net profit, and 1 delisted firm from the 249 total IPO population.p.4
6. Sample companies recorded an average pre-IPO Return on Assets (ROA) of 0,119413 or 11,94%, ranging between a minimum of 0,0100 and a maximum of 0,3729.p.5
7. The sample maintained an overall average initial return underpricing level of 0,192250 or 19,23%.p.5