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The impact of margin trading and regulatory policy on IPO underpricing: Evidence from Türkiye

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Název: The impact of margin trading and regulatory policy on IPO underpricing: Evidence from Türkiye
Autoři: Ahmet Gökhan Arslan, Gonul Colak, Burak Pirgaip
Přispěvatelé: Finance, Helsinki
Zdroj: Borsa Istanbul Review. 25:1012-1025
Informace o vydavateli: Elsevier BV, 2025.
Rok vydání: 2025
Témata: 1 - Self archived, Margin trading, 2 - Hybrid open access publication channel, 1- Publicerad utomlands, 0- Ingen affiliation med ett företag, 1- Minst en av författarna har en utländsk affiliation, KOTA2025?, PREM0000, Initial returns, Underwriting, 512 Business and Management, 1 - Publication available open access by the publisher, Turkish capital markets, Initial public offerings (IPO), Regulation
Popis: This study examines the impact of margin loans and accompanying regulatory changes on the underpricing of initial public offerings (IPOs) in Türkiye, with a focus on the wave of IPOs from 2020 to 2023—a period during which the number of IPOs and proceeds from them reached record highs. Analyzing data from 154 IPOs, we find an average initial return of 35 percent, which shows significant underpricing, with an estimated $1.93 billion left on the table. Using multivariate regression models, we identify an inverse relationship between margin loans and abnormal initial returns, which indicates that higher margin trading is correlated with lower initial returns. Moreover, we find that restrictive margin loan policies positively affect initial returns, likely due to asymmetric information, such that underwriters adjust underpricing to attract retail investors with limited market experience. In addition, our results show that changes in policy that favor retail investor allocations positively impact on initial returns, as underwriters, who are limited with regard to accessing informed bidders, adjust prices to attract investors. This study offers new insights into the IPO and margin trading literature and has implications for policymakers and emerging markets.
Druh dokumentu: Article
Popis souboru: application/pdf
Jazyk: English
ISSN: 2214-8450
DOI: 10.1016/j.bir.2025.05.014
Přístupová URL adresa: http://hdl.handle.net/10138/600512
Rights: CC BY NC ND
Přístupové číslo: edsair.doi.dedup.....992b751e6ca00a202fe5a5a5f6a59061
Databáze: OpenAIRE
Popis
Abstrakt:This study examines the impact of margin loans and accompanying regulatory changes on the underpricing of initial public offerings (IPOs) in Türkiye, with a focus on the wave of IPOs from 2020 to 2023—a period during which the number of IPOs and proceeds from them reached record highs. Analyzing data from 154 IPOs, we find an average initial return of 35 percent, which shows significant underpricing, with an estimated $1.93 billion left on the table. Using multivariate regression models, we identify an inverse relationship between margin loans and abnormal initial returns, which indicates that higher margin trading is correlated with lower initial returns. Moreover, we find that restrictive margin loan policies positively affect initial returns, likely due to asymmetric information, such that underwriters adjust underpricing to attract retail investors with limited market experience. In addition, our results show that changes in policy that favor retail investor allocations positively impact on initial returns, as underwriters, who are limited with regard to accessing informed bidders, adjust prices to attract investors. This study offers new insights into the IPO and margin trading literature and has implications for policymakers and emerging markets.
ISSN:22148450
DOI:10.1016/j.bir.2025.05.014