Contagion Effect of Macro Economic Variables on Ipo Listing Activity: A Time Series Analysis in Indian Context

Abstract

Boom and slump also occurs in Initial public offer segment of corporate securities market. Studies in context of developed capital market have exhibited that the macroeconomic variables, as well as market specific variables cause fluctuation in size and number of initial public offers (IPOs). This study, examines the relation between the financial market conditions (i.e. interest rate), total economy activity (GDP) and the IPO activity. Data from Jan 2004 to 2016 on quarterly basis was sampled for the purpose of the analysis. Co-integration and Granger Causality tests performed on variables namely number of IPO issue, issue size, interest rate and GDP. It was found that the interest rate has cointegration, but do not have causal relationship with number of IPO issues, as well as with size of IPO. GDP showed a significant causal relation with issue size, but insignificant one with the number of issue. Our findings contradict with the findings of Kaya (2013) and Lowery (2004). Finally, it is concluded that only GDP has a causal relationship with the size of IPO.