Transformations  in
Business & Economics

IPO UNDERPRICING IN EMERGING CAPITAL MARKETS: A COMPARATIVE STUDY OF ROMANIA, BULGARIA AND HUNGARY
Cristina Duhnea, Diane Paula Corina Vancea, Loredana - Georgiana Frecea

ABSTRACT. The main purpose of well-functioning capital markets, that of financing the real economy through shares issue, is one of the most interesting subject for the financial literature. The initial public offerings represent a dynamic way to find funding for businesses as a startup or as a mature one especially in the South-Eastern Europe where an important part of the privatization process used the capital market as a source of investors. This article undertakes a comparative study testing the existence of IPO underpricing, and consequently of positive initial returns for IPO shares, on the capital markets of Romania, Bulgaria and Hungary. The findings offer an explanation for the small number of IPOs in the three countries, so far, a reduced foreign investor interest and fragile capital markets in terms of capitalization, liquidity and volumes of trading  .

KEYWORDS: initial public offering, underpricing, capital market, initial return, stock exchange index.

JEL classification: E44, G12, G10.