The main object of this paper is to study Russian capital market and the level of underpricing in this market. In order to reach this goal there have been decided to divide this paper in three main parts; theory, the Russian market and empiricism. Presented in chapter one of the paper is what the paper aims to discuss and research. There will be given research questions which the paper aims to answer during the cource of the paper and a final conclusion. Secondly there will be outlined the methodology that will be used. Also the structure of the paper and limitations will be presented. In chapter 3 of this paper the main theories on underpricing of initial public offering been discussed. The main theories cover the problem of existence of asymmetric information between marked participants: issuers, underwriters and investors. Other theories have also been mentioned, such as institutional explanation, behavioral explanation and the theory of control and ownership as an explanation of IPO underpricing. Chapter 4 discuss why companies whant to go public and different aspects surrounding an IPO. In chapter 5 the paper moves on to described the process of initial public offering in Russia and requirements that are necessary to achieve in order to get registered at stock exchange. Costs of going public and special features that characterize the Russian stock market are among the questions that have been answered. In chapter 6 there has been conducted an empirical study of theories discussed with use of data from the Russian capital marked. The study period is between years 2002 and July 2010. It was found that an average IPO underpricing in the estimated period is 9, 2 %. The tested theories revealed that the Rock’s Winners Curse theory is the closest to explain IPO underpricing in Russia. Investment bank reputation has also showed significant results, however, explanatory power of this test showed to be very small. A study of “Hot Issue Periods” has revealed that this is the case for the Russian marked in period between 2006 -2007. It may have been continued further on but the effect of Global financial crisis has resulted in steep decline in this area of marked as well. The Russian capital marked is relatively young and there has not been compounded as many studies as in other similar markets. This is one of the reasons why I chose this subject. My findings have revealed that similar to other country studies, one of the main explanations of IPO underpricing is asymmetric information between marked participants. There is not one specific theory but rather combination of different theories that can explain this phenomenon.
|Educations||MSc in Finance and Accounting, (Graduate Programme) Final Thesis|
|Number of pages||90|