Institutional settings and their impact on the ipo activity: An exploratory study based on qualitative modelling

Abstract

This article deals with the propagation of rumours about the introduction of institutional settings, which are intended to make the going public strategy in a country more attractive. Rumours significantly affect the level of uncertainty and can be both positive – if the market responds by increasing the initial public offering activity – or negative – if the market responds by a drop of primary issues. We document how the going public activity in a country might be promoted if both positive and negative rumours occur. The rumour spreading model called SIRaRu and qualitative trend-based modelling are applied. There are no quantifiers such as numbers or fuzzy sets needed. Altogether 17 variables are used to capture two dimensions of general institutional quality and internal state of the company. The numerical calculations result in a set S of 9 scenarios, which are complemented by a set T of 46 transitions. Hence, any past and future behaviour of the qualitative model QS can be reconstructed as a sequence of obtained scenarios. Moreover, a graphic solution was derived to study the behaviour of selected variables on the timeline.