Initial Public Offerings from perspectives of the market participants: Evidence from the Mongolian Stock Market

Abstract

This dissertation discusses IPO mechanism on Mongolian capital market from the perspectives of major parties involved in the process by analyzing possible factors to be cautious from in this developing situation and emphasizing the need to maintain a critical perspective.

First, the questionnaire survey is conducted to investigate motivations for conducting IPO behind recent issuers as well as investors’ incentives to subscribe new equity offerings. The results show that the most significant motivation to go public was to capture a “first-mover advantage” and experience a significant increase in a reputation of the firm. Also results from the survey conducted on investors suggest that among investors in a sample, the most significant incentives were encouraging market outlook and a reliable business concept.

Second, the concept of “underpricing” recurs in any work on IPO mechanisms as it is relevant because underpricing can encourage flipping activities in the market which may create further negative externalities. Also to state possible factors that impede the stock market growth, document review method is used to investigate experience of countries with similar economic background with Mongolia. The findings suggest that poor or too tight regulatory framework is the most significant barrier which market participants, especially issuers, face during IPO process.

Finally, to get a more comprehensive overview about IPO mechanism, regulatory perspective is investigated and the results can be concluded that the regulators are now in a position which they try not to impede any barriers in this growing situation while conducting proper due diligence at the same time.