Underpricing of initial public offerings at the Nairobi Securities Exchange between 1994 and 2014
Mumbo, Jane Valary
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Under pricing of initial Public Offerings is characterized by the closing price being higher than the offer price on the first day of trading. Research carried out in different financial markets has generated varied results with regard to the degree of under pricing present in the markets and its determinants. This study examines the extent of under pricing for listings on the Nairobi Securities Exchange between 1994 and 2014.The study establishes that IPOs on the Nairobi Securities Exchange are significantly under priced by approximately 46.28%firm specific and offer specific factors such the size of the offer, size of the firm, age of firm and the subscription rate of the offer are significant explanatory factors for the observed under pricing, with subscription rate being the most significant. The results are robust for varied binary regression model specifications.