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IPO Flipping and its Determinants in Bangladesh

In this paper, we attempt to determine the degree of IPO flipping and to investigate the factors that explain IPO flipping in Bangladesh. Based on a sample of on 96 IPOs in Bangladesh during the period between January 1994 and December 2001, we document that the average IPO flipping has been 29.67 percent in the first week, 74.21 percent in the first month and 177.3 percent in the first three months in the initial aftermarket. Regression results indicate that the size of the issue has significant negative influence and the institutional participation in the issue has significant positive influence on IPO flipping. This implies that relatively smaller issues are flipped more than larger issues and institutional participation in the new issue accelerates flipping that might contribute to market volatility. In addition, we also find that flipping is relatively lower in the hot issue market and that flipping varies significantly in different sectors. The policy implication is that investors can predict the liquidity and price of IPO stock in the short run aftermarket and regulators can frame guideline for limiting institutional allocation in a new issue.