Performance Of Initial Public Offerings (IPOs): Shariah And Non-Shariah Compliant Companies

Abstract

The company undertakes initial public offerings (IPOs) to establish a public market and raise equity financing. IPO issued by Shariah-compliant companies claimed to be performed differently than those without the certification. The purpose of this research is to compare the performance of Shariah and non-Shariah compliant companies through their IPOs initial returns and to examine whether the market capitalization and size of the offer could significantly affect the variance in IPO initial returns. The data used in this paper were from 32 companies listed in Bursa Malaysia between 2015 and 2021, of which 18 of them are Shariah-compliant and 14 are non-Shariah compliant. The result shows that Shariah-compliant IPOs have higher initial returns of 14.37% as compared to non-Shariah with initial returns of 6.29%. As for the variables, the size of the offer has more influence on IPO initial return compared to market capitalization irrespective of whether the status of the company is Shariah or non-Shariah. This study is to assist researchers, developing companies, and investors to seek knowledge on the impact of Shariah-compliant status regardless of its industry.