The Effect of Change in Malaysia Indigenous Equity Policy on IPO Underpricing

• Main Authors: Cheoh, Wei-Seng, 石維誠
• Other Authors: Yeh, Yin-Hua
• Format: Others
• Language: zh-TW
• Published: 2019
• Online Access: http://ndltd.ncl.edu.tw/handle/atc92z

碩士 === 國立交通大學 === 財務金融研究所 === 107 === The study examines the impact of changes in Malaysia Indigenous Equity Policy on initial public offering (IPO) underpricing. In 2009, Malaysia government lowered the rate of shareholding restrictions to indigenous group from 30% to 12.5%. Since 1976 , law has stipulated that IPO companies need to sell or transfer at least 30% of the shares to indigenous or indigenous-owned mutual funds. This paper compares the price changes of IPO in different companies before and after the implementation of the new policy. The samples of the study consist of 363 companies listed in Malaysia from 2002 to 2018. Among samples of 363 companies, 214 of them were listed between 2002 and 2008 while the rest, 149 IPO companies, were listed between 2009 and 2018. The first-day return rates during the 30% and 12.5% period were 22.31% and 17.67% respectively, resulting in a gap of approximately 5% which is in significant. By excluding 2008 outlier samples, the first-day rate between 2002 and 2008 turns out to be 25.23% and the T-test was significant. Most of the studies investigating Malaysia's IPOs believe that Malaysia's IPO discount ratio is higher than other countries, especially after the new economic policy. This is because the restrictions of indigenous equity and the involvement of relevant regulatory authorities lead to cheap IPO when pricing, thus lead to post-marketing and underpricing of IPO. In this study, we also found that the high discount rate from 2002 to 2008 came from oil and gas companies. In Malaysia, the oil and gas industry was monopolized by Petronas (Malaysia Oil Company) and most of the contracts issued by Petronas were given to indigenous companies. The study also found that the most important factor affecting the IPO discount rate is shareholding ratio. The higher the shareholding ratio of the shareholder is, the higher the IPO discount rate.