Estimation of Direct and Indirect Transaction Costs for IPOs in Indian Capital Markets
Sanghavi, Utkal (2006) Estimation of Direct and Indirect Transaction Costs for IPOs in Indian Capital Markets. [Dissertation (University of Nottingham only)] (Unpublished)
This dissertation investigates cost structure comprising of both direct and indirect costs for 109 IPOs listed on Indian stock markets during the sample time period January 2004 to May 2006, providing benchmark numbers for their further usage. It also makes an attempt to gauge relationship between IPO size and costs and discover cost differentials existing in the indian market on the basis of industry difference and the type of underwriter hired. This is carried out through the usage of six OLS regression models with size as a numeric independent variable and industry and underwriter acting as dummy independent variables regressed on dependant variables direct and indirect costs individually. The results showcase existence of lower direct costs in indian markets as compared to global developed markets. These direct costs not only seem to hold a negative relationship with the issue size but also vary significantly for different industries. These costs are observed to be lower for clients of foreign underwriters as compared to clients of other types of underwriters. Indirect costs on the other hand are quite high in indian markets as compared to other developed markets and they are well spread across different industries and different types of underwriters. High indirect cost is necessary for any issue to be successful in indian markets irrespective of size of an issue, industry or investment bank hired to manage the issue. Thus total costs incurred in indian markets are higher than developed markets as marginally lower direct costs are compensated by higher than average indirect costs.
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