N R INSTITUTE OF BUSINESS MANAGEMENT

BATCH: 2015-17

A RESEARCH PROPOSAL ON

A STUDY ON INVESTORS PERCEPTION

TOWARDS INITIAL PUBLIC OFFERING IN
AHEMDABAD

Submitted by:
Abhishek kalbalia (P1522)
Ganesh kumar (P1560)
LITERATURE REVIEW
The published work relating to the topic is reviewed. The relevant literature is reviewed on the
basis of Books, Periodicals, News Papers and Websites. The detailed review is given below:

The published work relating to the topic is reviewed. The relevant literature is reviewed on the
basis of Books, Periodicals, News Papers and Websites. The detailed review is given below:

Mahesh Nayak, (2010) in his article, point out that, IPOs have grown in size and entered their
own brave new world. Further he states that raising money in Indias booming economy cannot
be a onetime affair; if a company does not maintain a good relationships with investors and
rewards them well it may not able to go back to them when it want to raise money later

Jagannadham Thunuguntla (2011) in his research ,pointed out that, the age old philosophy of
understanding the company and sticking to the basics should be given due respect. Let the buyer
be made aware that the investor has to put a price tag to his hard earned money. There is a dire
need for investor education and awareness and the connections should be on a stable income than
a becoming rich overnight.

Jignesh B. Shahet et al.(2013)in their research, concluded that, the recent IPO Scam indicates
that even a highly automated system will not prevent malpractices. But steps should be taken by
SEBI to restrict such IPO Scam by applying know your customer (KYC) and unique
identification number to market players and investors.

Christopher Ray Reutzel (2012)( Institutional Investor Portfolio Stability and Post-IPO
Firm Survival: A Contingency Approach) This study examines the influence of institutional
investor portfolio stability on the survival of 379 IPO firms that went public in 1997. I find a
negative relationship between the amount of stable institutional investment in and newly public
firms and post-IPO firm failure. Consistent with multiple agency theory I also find that outside
director board control weakens the influence of stable institutional investment on post-IPO firm
failure. These results provide support for multiple agency theory and highlight the importance of
differences among and between principals and agents in the post-IPO setting. This study attempts
to answer the question of, Does the amount of IPO firm equity held by institutional investors
with stable investment portfolios influence post-IPO firm survival? As such, this study
considers the role that post-IPO institutional investment time horizons play in influencing IPO
firm adaptation to the rigors of public trading. In doing so this study contributes to multiple
agency theory by demonstrating that some principals, in this case institutional investors with
long-term investment horizons are better equipped to monitor newly public firms than those with
shorter-term investment horizons in order to ensure IPO firm survival. Moreover, we contribute
to multiple agency theory by considering the manner in which institutional investment portfolio
stability interacts with other managerial monitoring mechanisms that may produce similar
agency and time horizon benefits in order to test the theory developed in this study. In the section
that follows I develop theory and hypotheses which address the influence of this unique
institutional investment characteristic in the post-IPO context. Next I discuss our sample and
analytic procedures. I then proceed to discuss the results of our hypotheses tests and, discuss our
findings and contributions. I conclude by discussing limitations of this study and opportunities
for future research.

Rachel Blum(2011)( IPO Timing Determinants) Despite the extensive amount of IPO
literature, many unknowns still exists about the inner workings of the IPO process. This paper
seeks to extend upon the literature to first confirm whether the IPO market is an appropriate
economic indicator. We enhance the approach taken by previous studies with the addition of
excess reserves as a macroeconomic proxy to capture trends unique to the most recent recession.
Our findings provide support for capital demand, investor sentiment and stock market condition
as determinants of IPO fluctuations. The results also suggest that the uncertainty surrounding the
latest financial crisis has caused the average amount of IPO proceeds to decrease. Secondly, the
paper employs cross sectional data to examine the transition from private to public company at
the firm specific level. The size of an offering seems to be dependent upon macroeconomic
conditions as well as firm specific characteristics. However, we were unable to find statistically
significant differences between firms who go public during a recession and those who wait for
markets to improve. Economists devote a considerable amount of research in order to better
understand the IPO process. The importance of IPOs extends beyond the implications for Blue
the individual firm. The IPO market serves as an economic indicator in both practice and
academia due to its proven pro-cyclical nature (Lowry, 2003). During an economic expansion,
IPOs experience a hot market characterized by an increased number of firms going public and
increased proceeds, while cold markets, occurring during a recession, exhibit low levels of
IPO activity. These fluctuations may be partially due to herding behavior but the current study
focuses on the underlying economic conditions as well as firm specific qualities. Although there
is an extensive body of literature on IPOs, a relatively small amount of attention has been
devoted to understanding IPO activity during a recession. Lowry (2003) and He (2007) recognize
that variation in IPO volume cannot fully be explained by financing requirements and identify
the economically significant factors contributing to aggregate IPO fluctuations. Specifically, the
papers claim firms demand for capital, investor sentiment and information asymmetries
determine IPO volume. Consistent with these findings, Bugstallen (2008) suggest that firms issue
equity following period of high stock market valuations to take advantage of the associated low
cost of equity.

RICHARD B. CARTER*,FREDERICK H. DARK,and TRAVIS R.A.SAPP(2010)

(Characterizing the Risk of IPO Long-Run Returns: The Impact of Momentum, Liquidity,
Skewers, and Investment ) We study 6,686 IPOs spanning the period 1981-2005 and find that
the new issues puzzle disappears in a Fama-French three-factor framework. IPOs do not
underperform in the aftermarket on a risk-adjusted basis and do not underperform a matched
sample of non-issuers. IPO underperformance is concentrated in the 1980s and early 1990s, and
IPOs either perform the same as the market, or outperform on a risk-adjusted basis, during
1998-2005. We attribute this to the recent shift to alternative offering mechanisms. Factors for
momentum, investment, and liquidity help to explain aftermarket returns, whereas skewness does
not. IPO investors receive smaller expected returns due to negative momentum and investment
exposure and in exchange for higher liquidity. We further find that momentum and liquidity are
significant predictors of IPO initial returns, whereas skewness is not. The evidence shows that
IPO investors receive smaller expected returns due to negative momentum exposure. Higher
liquidity of new issues is further associated with lower average returns, suggesting that increased
trading tends to bid down.

Xiaoding Liu(2010)(The Economic Consequences of IPO Spinning) Using a sample of 56

companies going public in 1996-2000 in which top executives received hot initial public offering
(IPO) allocations from the bookrunner, a practice known as spinning, we examine the
consequences of spinning. These IPOs had first-day returns that were, on average, 23% higher
than similar IPOs. The profits collected by these executives were only a small fraction of the
incremental amount of money left on the table by their companies when they went public. These
companies were dramatically less likely to switch investment bankers in a follow-on offer: only
6% of issuers whose executives were spun switched underwriters, whereas 31% of other issuers
switched. These findings suggest that the spinning of executives accomplished its goal of
affecting corporate decisions. Spinning is the allocation by underwriters of the shares of hot
initial public offerings (IPOs) to company executives in order to influence their decisions in the
hiring of investment bankers and/or the pricing of their own companys initial public offering.
The term spinning refers to the fact that the shares are often immediately sold in the aftermarket
or spun for a quick profit, and an IPO is termed hot if it is expected to jump in price as soon
as it starts trading. More generally, this paper presents evidence on the economic consequences
of an agencyproblem arising from the delegation of decision-making to corporate managers.
Rarely, however, are there direct measures of the benefits received by executives and the costs
imposed on othershareholders as a result of actions that provide personal benefits to top
executives. In this paper, weare able to calculate the costs and benefits of spinning.

Suresh Radhakrishnan(2014)( Investment Banks' Entry into New IPO Markets and IPO Und
erpricing) Previous studies examining the role played by investment banks on the underpricing
of initial public offerings (IPOs) and their subsequent IPO business market shares in the United
States document mixed evidence. In particular, studies either find no relationship or find that the
greater the underpricing by an investment bank, the greater its subsequent IPO market share (see
Krigman et al. 2001, Nanda and Yun 1997, Dunbar 2000, Hoberg 2007).1 These results suggest
that competition among investment banks for IPO business does not mitigate IPO underpricing.
Hoberg (2007) and Dunbar (2000) argue that investment banks that have superior ability to value
companies can obtain IPO business even if they persistently underprice IPOs. A natural question
is how do investment banks gain such expertise? To provide insights into this question, we
examine IPO underpricing and investment banks subsequent IPO market shares in a new IPO
market. Specifically, we examine the IPOs of China-based companies in the Hong Kong Stock
Exchange, where investment banks are likely to be on an equal footing in the initial years in
terms of their ability to value these companies. In 1993, the ChineseHong Kong Memorandum
of Regulatory Cooperation allowed Chinese companies to be listed on the Hong Kong Stock
Exchange; these shares are called H-shares. At that time, all investment banks were competing in
the new IPO market on an equal footing in terms of their ability to value Chinese companies,
because Chinese companies were different from Hong Kong companies and were new to these
investment banks. This new IPO market provides an excellent setting to examine (a) whether
investment bank competition can help mitigate IPO underpricing, and (b) whether investment
banks can gain competitive advantage by obtaining the initial IPO business in new markets, i.e.,
learning by doing.

David Weild and Edward Kim((2010)Market structure is causing the IPO crisis and
more Market structure is causing the IPO crisis and more brings current two previously
published studies, Why are IPOs in the ICU? and Market structure is causing the IPO crisis.
Grant Thornton LLP has studied the decimation of the U.S.capital markets structure, the demise
of the IPO market and, with the release of A wake-up call for America, the systemic decline in
the number of publicly listed companies. We have provided analysis and insights and offered
ideas for a new, opt-in stock market capable of reinvigorating the U.S. IPO market and
stimulating job creation. Grant Thornton has discussed our findings with a wide range of key
market participants, including current and former SEC senior staffers, investment bank
executives and the venture capital community. In fact, our IPO study was cited in the NVCA1
4-Pillar Plan to Restore Liquidity in the U.S. Venture Capital Industry, which was released on
April 29, 2009. As our studies gained visibility, the topic and our conclusions gained favor with
the financial news media and with members of Congress and their staffers. On December 16,
2009, Sen. Ted Kaufman, D-Del., entered Market structure is causing the IPO crisis and A wake-
up call for America into the public record during his speech: Kaufman calls decline in IPOs
choke point to job creation, economic recovery. The United States needs an issuer and investor
opt-in capital market that provides the same structure that served the nation in good stead for so
many years. This market would make use of full SEC oversight and disclosure, and could be run
as a separate segment of NYSE or NASDAQ, or as a new market entrant. It would have these
attributes.
Ramana Nanda,Matthew Rhodes-Kropf(2013)(Journal of Financial Economics) We find that
venture capital-backed startups receiving their initial investment in hot markets are more likely
to go bankrupt, but conditional on going public, are valued higher on the day of their initial
public offering, have more patents, and have more citations to their patents. Our results suggest
that VCs invest in riskier and more innovative startups in hot markets (rather than just worse
firms). This is particularly true for the most experienced VCs. Furthermore, our results suggest
that increased capital in hot times plays a causal role in shifting investments to more novel
startups by lowering the cost of experimentation for early stage investors and allowing them to
make riskier, more novel, investments. We find this is particularly true for the most experienced
venture capital investors, who seem to systematically make more experimental investments in
hot markets. Our results, therefore, document a robust association between periods of financial
market activity and more experimental investments being made by venture capital investors. That
is, rather than a left shift (worse investments) or a right shift (better investments) in the
distribution of projects that are funded in such times, they suggest more variance in the outcomes
of the investments. They also point to the fact that observing a large number of failures among
startups that were funded at a certain time does not necessarily imply that ex ante lower quality
firms were funded in those times. Looking at the degree of success of startups is key to
distinguishing between one view where worse projects are funded and another in which riskier
firms are financed by investors.

Catherine Prescott (2010)(Regenerative nanomedicines: an emerging investment

prospective?) engineering and cell therapy has the potential to underpin a wide array of
regenerative medicine products and technologies and arguably represent the type of disruptive
technology sought by venture capitalists (VCs). However, within the life science arena, not all
disruptive technologies make compelling investments as the route to market may be ill-defined;
therefore, neither the required level of funding is known nor how the value of the investment will
be realized. Accordingly, what are the key factors that influence the decision of an investor to
invest in an emerging and disruptive technology such as regenerative nanomedicine? To answer
this question it is necessary to understand how venture capital works. The successful track record
of VCs investing in nanomedicine has underpinned their continued appetite to invest in the
healthcare and life sciences at a time when investment in nanotechnology applied to other sectors
has sharply declined (ObservatoryNano 2010). However, investee companies are developing
products that are aligned with those developed by the pharmaceutical industry, thereby
enhancing the probability of their adoption and successful route to market. There is no doubt that
the application of nanotechnology to regenerative medicine may offer enormous benefits
including the potential to control cell fate, generate advanced scaffolds for cell delivery and
modulate the immune response to implanted cells. However, there are multiple challenges
beyond those posed by the research alone, including how such products should be regulated and
whether they can be manufactured at scale cost-effectively to ensure that they are eligible for
reimbursement. It is anticipated that these challenges may be resolved over time and, in doing so,
this should bring clarity regarding their route to market. Increasing clarity serves to de-risk a
venture and will therefore be key to attracting substantial levels of commitment by investors and
the pharmaceutical and biotechnology industry.

Xuan Tian, Tracy Yue Wang(2011)(TOLERANCE FOR FAILURE AND CORPORATE

INNOVATION)We examine whether tolerance for failure spurs corporate innovation based on a
sample of venture capital (VC) backed IPO firms. We develop a novel measure of VC investors
failure tolerance by examining their tendency to continue investing in a venture conditional on
the venture not meeting milestones. We find that IPO firms backed by more failure-tolerant VC
investors are significantly more innovative. A rich set of empirical tests shows that this result is
not driven by the endogenous matching between failure-tolerant VCs and startups with high ex-
ante innovation potentials. Further, we find that the marginal impact of VC failure tolerance on
startup innovation varies significantly in the cross section. Being financed by a failure-tolerant
VC is much more important for ventures that are subject to high failure risk. Finally, we examine
the determinants of the cross-sectional heterogeneity in VC failure tolerance. We find that both
capital constraints and career concerns can negatively distort VC failure tolerance. We also show
that younger and less experienced VCs are more exposed to these distortions, making them less
failure tolerant than more established VCs. We believe that VC investors tolerance for failure is
crucial for the innovation productivity of VC-backed startups. VC investors are active investors
and important decision makers in the startup firms they finance. They typically have the final
decision power on whether to continue investment or to terminate a project. If VC investors are
not tolerant of early failure, then the ventures they finance are likely to be liquidated prematurely
upon initial unsatisfactory progress and therefore lose the chance to be innovative. Therefore, VC
investors tolerance for failure can prevent premature liquidation and allow entrepreneurial firms
to realize their innovation potentials. We infer a VC investors failure tolerance by examining its
tendency to continue investing in a project conditional on the project not meeting milestones.
RESEARCH OBJECTIVE

To find out the level of awareness about IPO in the investors.

To find out investors preference while investing money (whether investors feel that they
can make money in the stock market?).
To identify factor affecting the investor in investment in IPO.
To study the opinion if retail investor on initial public offer (IPOs) and important on them
to study the time of involvement in capital market has a significant impact on the
perception of investor regarding the market volatility being important factor for making
the decision of investment in IPO
To analyze and evaluate the complex IPO process and study and incorporate the legal
requirements of an IPO, SEBI Norms and Guidelines

SCOPE OF STUDY

We can have complete analysis of perception of retail investor who is investing in

IPO and in depth analysis of behaviour change of retail investor as well as initial public
offers and also understand the earning satisfaction level of retail investor from their
current investment and to understand the service provided to retail investor and analysis
of IPO.

RESEARCH DESIGN
Type of study :- exploratory research
Method of data collection:- survey
Research Instrument :- questionnaire
Research environment:- field study
DATA COLLECTION PLAN

Primary data:-
Primary data are those which is collected for the first time and our primary source
to collect the data is being through questionnaire.
Secondary data
Secondary data will be collected through website and document journals and
other online sources are consider as reliable sources for information which is
helpful for enhance the result of study research design

SAMPLING PLAN

Sampled population: Retail investor

Sample size :- 100
Sampling decision :- convince sampling (Non Random Sampling)
Sampling area :- Ahmedabad
Data analysis :- SPSS