A Comparative Analysis of Determinants of the Underpricing IPOs of Governmental and Non-governmental Companies; A Case Study of Accepted Governmental and Non-governmental Companies in Tehran Stock Exchange in 1999-2008

Document Type : Research Paper


1 Professor of Management, Industrial Management Group, Faculty of Management and Economics, Tarbiat Modarres University, Tehran

2 Assistant Professor of Management, Faculty of Social Siences and Economics, Azzahra University, Tehran

3 Ph.D. Student of Islamic Studies and Financial Management, Faculty of Islamic Studies and Management, Imam Sadiq University, Tehran


During the last two decades many countries have attempted to downsize the government through transferring governmental companies into private sector. The process that is called "privatization", in addition to expanding the private sector, can increase the government’s supervisory power. In this regard, the privatization of governmental enterprises and companies has been started in Iran in the past few years. There are various methods for privatization. The most widely used one in all countries including our country, is selling the shares of governmental enterprises to the private sector through the stock exchange. Empirical evidence suggests that governments are interested in underpricing governmental shares in initial public offering. Usually underpricing of governmental companies is higher than the underpricing of nongovernmental companies in initial public offering.
This research at first tries to compare the underpricing of governmental companies and the underpricing of nongovernmental companies in initial public offerings of Tehran Stock Exchange. Then it tries to identify the determinants of the underpricing in each group and finally it determines the contribution of each determinant. Findings indicate that all the companies appearing in Tehran Stock Exchange, both governmental and nongovernmental, are underpriced, but there are no significant differences between underpricing of governmental companies and the underpricing of nongovernmental companies in initial public offerings. Additionally, the only factor affecting the underpricing of nongovernmental companies in one or three-month maturity, is the number of personnel and the only factor affecting the underpricing of governmental companies in one-week maturity is the percentage of capital supplied in the initial public offering.


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Volume 7, Issue 1 - Serial Number 1
September 2013
Pages 157-185
  • Receive Date: 28 September 2013
  • Accept Date: 28 September 2013
  • First Publish Date: 28 September 2013