Title

Perception of retail investors to wards initial public offerings (IPOs) in Pakistan

Author

Abdul Mateen

Degree

Master of Business Administration Executive

Faculty / School

Faculty of Business Administration (FBA)

Year of Award

Spring 2018

Project Type

MBA Executive Research Project

Access Type

Restricted Access

Keywords

Retail investor -- Pakistan | Investment | Public offerings

Executive Summary

Equity market has proved reliable and economical source of raising capital for expansion and growth. Equity market has direct linkages to real economy and in numerous ways it supports the real businesses, encourages savings and makes borrowing simple and economical. Initial Public Offerings (IPOs) ensure resilience, vigor and depth in the equity market. Moreover, it provides a profitable route to exit from the business by transferring both the ownership rights and management control of the business to a large pool of owners and to more professional managers respectively as well as a way to raise large sum of money for expansion. It enlarges the investorbase in the country by attracting common people to invest in the flourishing sectors of the economy, making them interested in the economy of the country and increasing their cognizance of the economic policies of the government. Furthermore, it develops a sense of entrepreneurship by incentivizing them to contribute directly to the real economy. Hitherto, Initial Public offerings (IPOs) have not realized their desired results in Pakistan. The paper explores two broad sets of factors, procedural obstacles and behavioral mistrust that are primarily responsible for lukewarm response of general public and common investors to IPO offerings. These factors significantly cause lack of enthusiasm of investors which leads to low investors base in the country. It is also recognized that on-line investors, respond differently than traditional investors to the two identified factors. It is also found that retail investors base their decisions on clues from others instead of making them independently. Primary data was collected through questionnaires and thirty-one closed ended questions were asked, six of them belong to investors profile and the rest recorded the investors' response on different factors. Responses of investors are recorded on five-point Likert scale where 5 denotes "strongly agree" and 1 represents "strongly disagree". Sample size is determined by Roscoe (1975) 'rule of thumb' method and spilt-half method. Descriptive statistics and inferential statistics, t-statistic and p-values are used for describing, calculating and concluding the hypothesis. Secondary data of all IPOs issues during 2000 to 2018 was analyzed to make our case more convincing that there are some procedural and behavioral issues that obstruct the much-desired growth of the equity market in Pakistan. Triangulation and validation of data is accomplished properly.

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