Effect of New IPO Issuance on the Secondary Market: Evidence from Dhaka Stock

Exchange (DSE)

Mohammad Farhad Hossain*

Mohammad Moniruzzaman Siddiquee**
K. M. Zahidul Islam***

Abstract
When there are new IPOs in the market, the question comes up how the investors
show their interest towards the IPOs. Do the investors mobilize their investments
from secondary market to the IPO? Because of such fund mobilization, do the
transaction volumes or other variables like market capitalization and total turnover
of stock exchange face any pressure? This paper tries to find out the answer
whether because of investors’ interest towards IPO creates a pressure on the
performance of DSE variables like share price index, total turnover value (BDT),
and market capitalization (BDT). This paper finds that the impact of the IPOs on
the DSE is not convincing. However, when the number of IPOs is huge during a
certain time period, the market cannot ingest the IPO volumes, thus the impact of
IPOs has been revealed as significant. And when the number of IPOs is very low,
the impact is not significant. This paper also finds that the size of the IPO has no
role to influence the DSE variables.

I. INTRODUCTION
It is well documented [Ibbotson (1975), and Ritter (1984)] that initial public offerings (IPOs)
of common stock, on average, earn abnormally high initial returns when returns are measured
from the offer price to the closing price at the end of the first and second day of trading.
Substantial research has focused on the causes of underpricing and the long-run performance
of IPOs as a group [Ritter (1991), and Brav and Gompers (1997)].

Reese (1998) argued that an IPO’s initial return, its initial trading volume, and its long-term
trading volume are all affected by an underlying variable called “investor interest”. He also
stated that the IPOs with greater investor interest tend to be underpriced while those with less
investor interest are overpriced relative to the true demand for the issue. If we consider
investor interest as a valid ‘variable’ to determine the direction of IPO pricing, then another
variable, namely, liquidity of the investor, is also important. Groth, Lewellen, Schlarbaum,
and Lease (1979) have reported that “buy” recommendations by the brokerage community
outnumbers “sell” recommendations by wide margins. This study stated that of 6,000

*
Associate Professor, Faculty of Business Administration, American International University – Bangladesh.
**
Lecturer, Faculty of Business and Economics, Daffodil International University, Dhaka, Bangladesh.
***
Lecturer, Department of Business Administration, Jahangirnagar University, Dhaka, Bangladesh.

1
recommendations from analysts, 77% suggested purchase while only 13% recommended
sales. Diefenbach (1972) reported that the ratio of purchases to sales recommendations to be
even further skewed. These studies showed that investors’ most of the sell decisions are due
to liquidity needs.

It is a matter of common observation that information plays a very dominant role in the
formation of share price. Incorporation of information is one very important aspect in the
price of share. Loughran and Ritter’s (2002) findings suggested that public information is
only partially incorporated into the offer price. In fact, this partial incorporation of public
information seems to suggest that the IPO pricing process is not efficient. This implies that
the IPO pricing could be either underpriced or overpriced. Of the 4,743 IPOs initially traded
on the three major U.S. exchanges over the twenty years beginning in 1973, Reese (1998)
found that 36.45% of the companies remain at their offer price or decline in price during the
first two days of trading. Krigman, Shaw and Womack (1999) found that 25% of the IPOs
issued from 1988-1995 closed at or below their offer price at the end of their first day of
trading. In Benveniste and Spindt’s (1989) model of IPO underpricing, underwriters
deliberately underprice in order to induce potential investors to truthfully reveal their interest
in an offering during the pre-issue period. These studies indicate fact that there is very high
possibility of high initial returns if somebody could acquire shares from the primary market.
This possibility of high return tends to create interest among the investors to play at primary
market.

Now the question is what happens to the secondary market when there is any IPO in offering?
Do the investors, because of their interests in IPO, mobilize their investments from secondary
market to the IPO? Do the transaction volumes or other variables like market capitalization
and total turnover of stock exchange face any pressure because of such assumed fund
mobilization? This paper tries to find out the answer whether there is any pressure at DSE
due to fund mobilization at the time of IPO. General objective of this study is to identify
whether IPO creates a pressure on the performance of DSE variables like share price index,
total turnover value (BDT), and market capitalization (BDT). The discussion of this paper has
been organized in the following order. Section II of this paper discusses IPO scenario of
DSE. Section III and IV discuss the methodology and the findings respectively. The paper
concludes the discussion in Section V.

2
II. IPO SCENARIO OF BANGLADESH
From 1994 to 2005 (up to July), the number of companies going public and subsequently
listed on the DSE or on the Chittagong Stock Exchange (CSE) or on both exceeded one per
month whereas in the United States it exceeded one per business day (Ritter and Welch
(2002)). However, the number of IPOs has varied from year to year, with some years having
fewer than 10 IPOs, and others having more than 20. Year-by-year variation in issuance of
IPO phenomena is shown in Appendix 1. The 1990s saw an aggressive IPO activity (about
BDT 332.91 million in issuing activity per year). In the 2000s, issuing volume sharply
declined to BDT 264.41 million per year during 2001 to 2005 (up to July, 2005).

The issuance of IPO, in number and in amount of capitalization, has gone down dramatically
in period November 2003 and July 2004 (Figure 1 and 2). This is one of the reasons why the
rate of oversubscription has gone up in recent years. The total amount of oversubscription
during the stated period of FY 2004 was 2100%, which sharply doubled during the
corresponding period of FY 2005 to about 4332%, implying less opportunity in the equity
market for small investors, who did not find depositing in the banks lucrative any more
(CPD, 2005). CPD had also revealed that IPOs, in recent periods, are mainly coming from the
banking and financial sectors and not from the real sector (after the Lafarge Surma Cement in
November 2003). No IPOs from telecommunication sectors were observed although the
sector is promising. The scarcity of IPOs can also be linked with the ever increasing all share
price index. Moreover, the buying of new IPOs is becoming increasingly expensive (for
higher price) and difficult (for lower IPO entry).

Lowry and Schwert (2002) noted that IPO volume tends to be higher following periods of
especially high initial returns, and their findings suggest that this relation is driven by
information learned by the investors during the registration period. The findings of Rajan and
Servaes (1997, 2003), Lee and Thaler (1991), Lerner (1994), and Pagano, Panetta, and
Zingales (1998) suggested that IPO volume is related to various forms of market irrationality.
Consistent with this finding, Lerner, Shane and Tsai’s (2003) results suggested that periods of
low IPO volume represent times when private firms “cannot” have access to the equity
markets on favorable terms. Pagano et al. (1998) found that companies are more likely to
have IPOs when the average market-to-book ratio of public firms in their industry is higher.
Empirically it has been widely observed that on an average, IPOs are underpriced. However,
the large underpricing in IPOs in emerging capital markets cannot be deemed as normal

3
underpricing that is observed in the developed capital markets. Bangladesh is no exception to
this.

Figure 1: Entry of IPOs in the Capital Market (Yearly statistics)

Entry of IPO duri ng the pe riod 1994-2005 (up to Jul y)

25

20
No. of IPO

15

10

0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
(up to
July)
Year

Source: www.dsebd.org

Figure 2: IPO Amount during the Period 1994 – 2005 (up to July)

Public Subscription in IPO during the Period 1994 – 2005 (up to July)

3000
Amount in Million BDT

2500
2000
1500
1000
500
0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
(up to
July)
Year

Source: www.dsebd.org

III. MODEL SPECIFICATION AND METHODOLOGY

To identify the effect of new IPO issuance on DSE, we have considered three variables,
namely: share price index, total turnover value (in BDT), and market capitalization (in BDT)
of the selected trading days. The time to study has been categorized into three timeframes:
Pre-application period (Pre-IPO), Application, allotment and refund period (AAR), and Post
allotment and refund period (Post-IPO). We have defined pre-application period as ten days
before the opening day of application; AAR period as opening and closing days for

4
application, plus 5 days after the allotment announcement. For example: if opening day for
the IPO is September 2 and closing day is September 5, and if the allotment announcement
day is September 20, then whole AAR period will be from September 2 to September 25.
Finally, Post-IPO period is defined as 5 days after the last date of allotment period. Here,
considering the above example, the Post-IPO time range will be September 25 to September
30.

We assume that Pre-IPO and Post-IPO periods are normal time periods without any IPO
pressure in the market. Thus, theoretically there should be no significant difference in any of
the variables (share price index, total turnover value, and market capitalization) between
these two different time periods. We also assume that if there is any sell pressure at the stock
exchange, there should be a significant difference in the amount of share price index, total
turnover, and market capitalization during AAR period in comparison to those at Pre-IPO and
Post-IPO periods.

We have applied t-test assuming unequal variances (because the data in each time frame is
less than 30) to determine whether there is any significant difference in the variables (share
price index, turnover and market capitalization) of Pre-IPO and Post-IPO periods. Then we
used ANOVA to test the variables of all the three periods – Pre-IPO, AAR, and Post-IPO
periods (Figure 3). The decision rule is: if t-test for a particular company shows that there is
no significant difference in a variable but a significant difference in ANOVA result, then that
means the variation is due to AAR period data. This will help us to deduce that the IPO of
that particular company had significance influence on that particular variable. However, if no
significant difference is found then we can infer either the market has enormous capacity that
IPO announcement does not have any effect on it, or prospective investors are not relying on
the capital market as they are keeping huge funds to be invested. In another word, we can
comment that DSE is underinvested. In brief, our model takes the following assumptions:

(1) Share price index, turnover and market capitalization of DSE is a function of IPO of a
particular firm, which we denote as DSEx = ƒ(IPOi), where, x denotes for DSE variables
(share price index, turnover and market capitalization) and i for company i.
(2) If assumption 1 holds true, then we may assume that the market is not sufficiently
efficient to hold the IPO volumes.

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(3) If assumption 1 does not hold true, then we may assume that (a) either the market has
enormous capacity so that IPO announcement does not have any effect on it, or (b) the
prospective investors are not relying on the capital market as they are keeping huge funds
to be invested. That is, DSE is underinvested.

Figure 3: Statistical Test Model

t-test

Pre-IPO AAR Post-IPO

ANOVA

The sample of the study consists of 24 companies, which offered IPOs from 1994 to 2005 (up
to July). The sample companies have been picked up on the basis of the amount of the public
offering. During the sample study period, only two companies – one for the highest amount
of public offerings and one for the lowest – have been selected for each year. A complete list
of the companies, including the DSE ticker abbreviation is available in Appendix 2. For
making the evaluation, we have collected data regarding share price index, total turnover
value (in BDT) and market capitalization (in BDT) from DSE Library.

Tested Hypotheses
For the t-test, the set of hypotheses to be tested in the Pre-IPO, AAR, and Post-IPO period at
5% level of significance are as follows:

I a. H 0 : µ PRICE INDEX PRE − IPO = µ PRICEINDEX POST − IPO

H a : µ PRICE INDEX PRE − IPO ≠ µ PRICEINDEX POST − IPO

II a. H 0 : µ TURNOVERPRE − IPO = µ TURNOVERPOST − IPO

H a : µ TURNOVERPRE − IPO ≠ µ TURNOVERPOST − IPO

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III a. H 0 : µ CAPITALIZATION PRE − IPO = µ CAPITALIZATION POST − IPO

H a : µ CAPITALIZATION PRE − IPO ≠ µ CAPITALIZATION POST − IPO

H0: There is no significant difference in the share price index, total turnover value and market
capitalization of the Pre-IPO and the Post-IPO periods.

Ha: There is a significant difference in share price index, total turnover value and market
capitalization in the Pre-IPO and the Post-IPO periods.

Following set of hypotheses are considered for ANOVA tests at 5% level of significance:

I b. H 0 : µ PRICE INDEX PRE − IPO = µ PRICEINDEX POST − IPO = µ PRICE INDEX AAR

H a : µ PRICE INDEX PRE − IPO ≠ µ PRICEINDEX POST − IPO ≠ µ PRICE INDEX AAR

II b. H 0 : µ TURNOVERPRE − IPO = µ TURNOVERPOST − IPO = µ TURNOVERAAR

H a : µ TURNOVERPRE − IPO ≠ µ TURNOVERPOST − IPO ≠ µ TURNOVERAAR

III b. H 0 : µ CAPITALIZATION PRE − IPO = µ CAPITALIZATION POST − IPO = µ CAPITALIZATION AAR

H a : µ CAPITALIZATION PRE − IPO ≠ µ CAPITALIZATION POST − IPO ≠ µ CAPITALIZATION AAR

H0: There is no significant difference in the share price index, total turnover value and market
capitalization of the Pre-IPO, AAR and the Post-IPO period.

Ha: There is a significant difference in share price index, total turnover value and market
capitalization of the Pre-IPO, AAR and the Post-IPO period.

IV. RESULTS
Results show that out of 24 IPOs, 11 (46% of the sample IPOs) have significant impact on the
share price index (Appendix 3). Six (55%) of these 11 IPOs are small IPOs. The companies,
which had significance impact on the share price index were EHL (1994), NORTHERN
(1994), PRIMETEX (1995), RASPIT (1995), KAY&QUE (1996), GEM Knitwear Fabrics
(1997), RANFOUNDRY (1999), EXIMBANK (2004), ICBISLAMIC (2004), GLOBALINS
(2005), FAREASTLIF (2005) having no representation from 1998, and from 2000 to 2003.
Regarding the total turnover, results show that out of 24 IPOs, 10 (42%) has significant

7
impact on the total turnover (Appendix 4). Six (60%) of these 10 IPOs are large IPOs. The
companies, which had have significant impact on the total turnover were EHL (1994),
NORTHERN (1994), PRIMETEX (1995), RASPIT (1995), KAY&QUE (1996),
ALARABANK (1998), FUWANGFOOD (2000), EXIMBANK (2004), GLOBALINS
(2005), FAREASTLIF (2005) having no representation from 1997, 1999, 2001, 2002 and
2003. Results show that out of 24 IPOs, 11 (46%) has significant impact on the market
capitalization (Appendix 5). Six (60%) of these 11 IPOs are small IPOs. The companies,
which have significant impact on the market capitalization were EHL (1994), NORTHERN
(1994), PRIMETEX (1995), RASPIT (1995), KAY&QUE (1996), SAFKOSPINN (1999),
DUTCHBANGL (2001), EXIMBANK (2004), ICBISLAMIC (2004), GLOBALINS (2005),
FAREASTLIF (2005) having no representation from 1997, 1998, 2000, 2002 and 2003.

Out of 24 sets of results only eight (33%) IPOs had complete impact on the DSE variables
under study. These IPOs had impact on all the three variables of DSE – share price index,
total turnover, and market capitalization. Most of these IPOs are during 1994 to 1996 (five in
number); and three during 2004 and 2005. Out of 72 different outcomes for three different
variables, 32 (44%) outcomes show significant impact of IPO on any of the DSE variables
(Appendix 6). Important thing is, size of the IPO – small or large – does not have any
influence on the variables. Out of eight convincing results, both large and small IPOs
represent four each. And out of 32 outcomes with significant impact, 15 are by small IPOs
and the remaining 17 are by large IPOs. So, no particular IPO size has stronger impact on the
DSE variables.

We have identified that in 1998, 2000, 2002 and 2004, the number of IPOs were least
(Appendix 1). It may be assumed that during these years, because of low supply of IPOs, the
effect on the DSE variables would be higher. But our study found no significant impact like
this. Among these four years, only in seven out of 24 cases (29%), there was significant
impact on the DSE variables. On the contrary, 1994, 1995 and 1996 of the study periods were
the years with highest IPOs. Among 18 cases during these periods, significance influence had
been found in 15 cases (83%). So, it may be conclude that the higher the number of IPOs the
higher the investor interest, which lead to a pressure on the market. On the contrary, a lean
number of IPOs also lead to a lean in investor interest, which ultimately had no impact on the
market.

8
V. CONCLUSIONS
The statistical results show that the impact of the IPOs on the DSE is not convincing. This
leads us to reject our first assumption that DSE variables are functions of IPOs. But this
cannot lead to convincing nullification of our second assumption that “the market is not
sufficiently efficient to hold the IPO volumes”, as a pattern has been found from this study
that when the number of IPOs are higher in number during a certain time period then there is
significant impacts of IPOs on the DSE variables, and when there is low number of IPOs, the
impact is not significant. This pattern leads us to conclude that when the number of IPOs is
huge the market cannot ingest the IPO volumes, thus the impact of IPOs is significant. This
can be a policy guideline to Securities and Exchange Commission. Again, when the number
of IPOs remains very low during a certain time period, DSE remains underinvested. It can
also be concluded that size of the IPO has no role to play in the DSE variables.

References

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Loughran, T., and Ritter, J. (2002). Why don’t issuers get upset about leaving money on the table in
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10
Appendix

Appendix 1: Industry-wise IPO during 1994-2005

Sector 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Bank (leasing 1 0 0 1 1 4 1 1 1 6 2 4
included)
Cement 0 2 0 1 2 0 0 0 2 1 0 0
Ceramic 0 0 2 0 1 0 0 0 0 1 0 0
Engineering 0 1 3 0 0 3 0 0 0 0 0 0
Food and Allied 4 1 3 4 0 1 2 4 1 0 0 0
Fuel and Power 0 0 0 0 0 0 0 0 0 0 0 1
Insurance 5 6 2 0 0 0 1 1 0 0 0 9
Investment 0 1 2 0 0 0 1 0 0 1 1 1
IT 0 0 0 0 0 0 1 1 2 2 0 0
Jute 1 0 0 0 0 0 0 0 0 0 0 0
Miscellaneous 0 1 4 1 0 0 1 0 1 3 0 0
Paper and Printing 1 0 0 0 0 0 0 1 0 0 0 0
Pharmaceuticals 3 0 0 1 1 0 0 1 0 0 0 0
and Chemicals
Service and Real 1 0 0 1 0 0 0 1 1 0 0 0
Estate
Tannery Industry 0 0 1 1 1 1 0 0 0 0 0 0
Textile 7 9 5 2 0 1 0 1 0 0 0 0
Total 23 21 22 12 6 10 7 11 8 14 3 15
Debentures 3 3 1 - - - - - - - - -
Public Subs. (in 117.82 10.69 1689.23 250.61 36.57 102.19 123.28 127.68 88.41 305.98 623.34 264.41
million BDT) (up to July)

Appendix 2: Name of the Sample Companies with DSE Ticker Abbreviation

Year Name of the Company DSE Ticker Subscription Subscription Issued Capital in Public Offer in
Abbreviation Opening Closing BDT BDT
1994 Eastern Housing Ltd. EHL 06/08/1994 15/08/1994 600,000,000 140,000,000
Northern Jute NORTHERN 10/07/1994 19/07/1994 17,000,000 3,400,000
1995 Prime Textiles Spinning PRIMETEX
Mills Ltd. 14/09/1995 05/10/1995 382,000,000 286,500,000
Raspit Inc. (BD) RASPIT 21/09/1995 30/09/1995 8,000,000 4,000,000
1996 Monno Fabric Ltd. MONNOFABR 14/01/1996 07/02/1996 1,150,000,000 539,175,000
Kay & Que KAY&QUE
(Bangladesh) Ltd. 07/07/1996 16/07/1996 385,000,000 9,000,000
1997 Gachihata Aquaculture GACHIHATA 09/11/1997 18/11/1997 207,000,000 103,500,000
GEM Knitwear Fabrics Not Available
Ltd. 15/07/1997 24/07/1997 20,000,000 10,000,000
1998 Al Arafa Islami Bank ALARABANK
Ltd. 12/07/1998 30/07/1998 253,000,000 126,500,000
J. H. Chemicals Not Available 28/06/1998 07/07/1998 33,000,000 16,500,000
1999 Rangpur Foundry Ltd. RANFOUNDRY
11/04/1999 22/04/1999 100,000,000 20,000,000
SAFKO Spinnings Mills SAFKOSPINN
Ltd. 04/04/1999 18/04/1999 160,000,000 80,000,000
2000 Fu Wang Food Ltd. FUWANGFOOD
06/04/2000 17/04/2000 160,000,000 30,000,000
Raspit Data RASPITDATA
Management 05/11/2000 09/11/2000 50,000,000 10,000,000
2001 Dutch Bangla Bank Ltd. DUTCHBANGL 15/01/2001 24/01/2001 202,135,000 10,000,000
Rangamati Food RANGAFOOD
Products Ltd. 27/03/2001 05/04/2001 30,000,000 10,000,000
2002 BD Com Online Ltd. BDCOM 06/10/2002 07/10/2002 100,000,000 30,000,000
Fine Food Ltd. FINEFOODS 07/01/2002 08/01/2002 70,000,000 15,000,000
2003 One Bank Ltd. ONEBANKLTD 11/08/2003 12/08/2003 600,000,000 196,980,000
Khaja Mosaic Tiles & Not Available
Stone Ltd. 09/03/2003 11/03/2003 80,000,000 10,000,000
2004 Export Import Bank of EXIMBANK
Bangladesh Ltd. 24/07/2004 28/07/2004 627,750,000 313,875,000
ICB AMCL Islamic ICBISLAMIC
Mutual Fund 16/06/2003 30/06/2003 100,000,000 70,000,000
2005 Global Insurance Ltd. GLOBALINS 29/01/2005 09/02/2005 150,000,000 90,000,000
Fareast Islami Life FAREASTLIF
Insurance 07/05/2005 11/05/2005 75,000,000 45,000,000

11
Appendix 3: Statistical Results on Share Price Index
Year DSE Ticker Abbreviation of the IPO Size Test Result Significant
of IPO Sample Company Pre-IPO & Post-IPO Pre-IPO, AAR, and Effect On Share
(t-Test) Post- IPO (ANOVA Price Index
Test)
1994 EHL Large Fail to reject H0 Reject H0 Yes
NORTHERN Small Fail to reject H0 Reject H0 Yes
1995 PRIMETEX Large Fail to reject H0 Reject H0 Yes
RASPIT Small Fail to reject H0 Reject H0 Yes
1996 MONNOFABR Large Reject H0 Reject H0 No
KAY&QUE Small Fail to reject H0 Reject H0 Yes
1997 GACHIHATA Large Reject H0 Reject H0 No
GEM Knitwear Fabrics Ltd.* Small Reject H0 Fail to reject H0 Yes
1998 ALARABANK Large Reject H0 Reject H0 No
J. H. Chemicals* Small Reject H0 Reject H0 No
1999 RANFOUNDRY Large Reject H0 Fail to reject H0 Yes
SAFKOSPINN Small Reject H0 Reject H0 No
2000 FUWANGFOOD Large Fail to reject H0 Fail to reject H0 No
RASPITDATA Small Reject H0 Fail to reject H0 No
2001 DUTCHBANGL Large Reject H0 Fail to reject H0 No
RANGAFOOD Small Fail to reject H0 Fail to reject H0 No
2002 BDCOM Large Reject H0 Fail to reject H0 No
FINEFOODS Small Reject H0 Fail to reject H0 No
2003 ONEBANKLTD Large Reject H0 Reject H0 No
Khaja Mosaic Tiles & Stone Ltd.* Small Reject H0 Fail to reject H0 No
2004 EXIMBANK Large Fail to reject H0 Reject H0 Yes
ICBISLAMIC Small Fail to reject H0 Reject H0 Yes
2005 GLOBALINS Large Fail to reject H0 Reject H0 Yes
Small Fail to reject H0 Reject H0 Yes
FAREASTLIF
Source: Study result
* DSE Ticker abbreviation is not available.

Appendix 4: Statistical Results on Total Turnover Value (BDT)

Year DSE Ticker Abbreviation of the IPO Size Test Result Significant Effect On
of IPO Sample Company Pre-IPO & Post-IPO Pre-IPO, AAR, Total Turnover
(t-Test) and Post- IPO Value (BDT)
(ANOVA Test)
1994 EHL Large Fail to reject H0 Reject H0 Yes
NORTHERN Small Fail to reject H0 Reject H0 Yes
1995 PRIMETEX Large Fail to reject H0 Reject H0 Yes
RASPIT Small Fail to reject H0 Reject H0 Yes
1996 MONNOFABR Large Fail to reject H0 Fail to reject H0 No
KAY&QUE Small Fail to reject H0 Reject H0 Yes
1997 GACHIHATA Large Reject H0 Reject H0 No
GEM Knitwear Fabrics Ltd.* Small Fail to reject H0 Fail to reject H0 No
1998 ALARABANK Large Fail to reject H0 Reject H H0 Yes
J. H. Chemicals* Small Fail to reject H0 Fail to reject H0 No
1999 RANFOUNDRY Large Reject H0 Reject H0 No
SAFKOSPINN Small Reject H0 Reject H0 No
2000 FUWANGFOOD Large Fail to reject H0 Reject H0 Yes
RASPITDATA Small Reject H0 Fail to reject H0 No
2001 DUTCHBANGL Large Reject H0 Fail to reject H0 No
RANGAFOOD Small Fail to reject H0 Fail to reject H0 No
2002 BDCOM Large Reject H0 Fail to reject H0 No
FINEFOODS Small Reject H0 Fail to reject H0 No
2003 ONEBANKLTD Large Reject H0 Reject H0 No
Khaja Mosaic Tiles & Stone Ltd.* Small Reject H0 Fail to reject H0 No
2004 EXIMBANK Large Fail to reject H0 Reject H0 Yes
ICBISLAMIC Small Fail to reject H0 Fail to reject H0 No
2005 GLOBALINS Large Fail to reject H0 Reject H0 Yes
FAREASTLIF Small Fail to reject H0 Fail to reject H0 Yes
Source: Study result
* DSE Ticker abbreviation is not available.

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Appendix 5: Statistical Results on Market Capitalization (BDT)
Year DSE Ticker Abbreviation of the IPO Size Test Result Significant
of IPO Sample Company Pre-IPO & Post-IPO Pre-IPO, AAR, Effect On
(t-Test) and Post- IPO Market
(ANOVA Test) Capitalization
(BDT)
1994 EHL Large Fail to reject H0 Reject H0 Yes
NORTHERN Small Fail to reject H0 Reject H0 Yes
1995 PRIMETEX Large Fail to reject H0 Reject H0 Yes
RASPIT Small Fail to reject H0 Reject H0 Yes
1996 MONNOFABR Large Reject H0 Reject H0 No
KAY&QUE Small Fail to reject H0 Reject H0 Yes
1997 GACHIHATA Large Reject H0 Reject H0 No
GEM Knitwear Fabrics Ltd.* Small Reject H0 Reject H0 No
1998 ALARABANK Large Reject H0 Reject H0 No
J. H. Chemicals* Small Reject H0 Reject H0 No
1999 RANFOUNDRY Large Reject H0 Reject H0 No
SAFKOSPINN Small Fail to reject H0 Reject H0 Yes
2000 FUWANGFOOD Large Fail to reject H0 Fail to reject H0 No
RASPITDATA Small Reject H0 Reject H0 No
2001 DUTCHBANGL Large Fail to reject H0 Reject H0 Yes
RANGAFOOD Small Fail to reject H0 Fail to reject H0 No
2002 BDCOM Large Reject H0 Reject H0 No
FINEFOODS Small Reject H0 Reject H0 No
2003 ONEBANKLTD Large Fail to reject H0 Fail to reject H0 No
Khaja Mosaic Tiles & Stone Ltd.* Small Reject H0 Reject H0 No
2004 EXIMBANK Large Fail to reject H0 Reject H0 Yes
ICBISLAMIC Small Fail to reject H0 Reject H0 Yes
2005 GLOBALINS Large Fail to reject H0 Reject H0 Yes
FAREASTLIF Small Fail to reject H0 Reject H0 Yes
Source: Study result
* DSE Ticker abbreviation is not available.

Appendix 6: Summary of the Statistical Results

Year DSE Ticker IPO Size Effect on
Share Price Total Turnover Market
Index Capitalization
1994 EHL Large Yes Yes Yes
NORTHERN Small Yes Yes Yes
1995 PRIMETEX Large Yes Yes Yes
RASPIT Small Yes Yes Yes
1996 MONNOFABR Large No No No
KAY&QUE Small Yes Yes Yes
1997 GACHIHATA Large No No No
GEM Knitwear Fabrics Ltd.* Small Yes No No
1998 ALARABANK Large No Yes No
J. H. Chemicals* Small No No No
1999 RANFOUNDRY Large Yes No No
SAFKOSPINN Small No No Yes
2000 FUWANGFOOD Large No Yes No
RASPITDATA Small No No No
2001 DUTCHBANGL Large No No Yes
RANGAFOOD Small No No No
2002 BDCOM Large No No No
FINEFOODS Small No No No
2003 ONEBANKLTD Large No No No
Khaja Mosaic Tiles & Stone Ltd.* Small No No No
2004 EXIMBANK Large Yes Yes Yes
ICBISLAMIC Small Yes No Yes
2005 GLOBALINS Large Yes Yes Yes
FAREASTLIF Small Yes Yes Yes
Source: Study result
* DSE Ticker abbreviation is not available.

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