ANALYSIS OF THE EFFECT OF UNDERWRITER REPUTATION AND AUDITOR REPUTATION ON THE UNDERPRICING IPO SHARES

Abstract

This research examines the factor that effect the underpricing IPO shares all companies that listed on Indonesia Stock Exchange from 2009-2012. The factors that were tested include initial return or underpricing, underwriter reputation, auditor reputation, and company size. The dependent variable is the uderpricing or the initial return. The independent variables are underwriter reputation and auditor reputation. And for the control variable is company size. Researcher in this study only examined the effect of the underwriter reputation and the auditor reputation to the underpricing IPO shares in companies that doing IPOs listed on the Stock Exchange Indonesia in the period 2009-2012. This research aimed to examine the factors that influence to the underpricing IPO shares using sample of 83 companies that going public or do IPO in the period 2009 to 2012. Based 83 companies that going public or do IPO in the period 2009 to 2012, there are 66 companies that have positive initial return or underpricing, 16 companies have positive initial return or overpricing, and 1 companies have incomplete data. The result of Independent variable underwriter reputation has negative significant effect to the initial return or underpricing. That means the better reputation of the underwriters will lower the levels of underpricing. Where the issuer or companies that use underwriter which has a good reputation that will reduce the gap of asymmetric information that is not disclosed in the prospectus that can reduce the uncertainty of the value of the company and the price in secondary market. If the smaller of these uncertainties, the level of the underpricing will be smaller too. And for auditor reputation has negative significant effect to the initial return or underpricing. That means the better reputation of the auditor will lower the levels of underpricing. And if the issuers or the company are using a reputable auditor, that can reduce the asymmetric information that not disclosed in the prospectus. If the smaller of these uncertainties, the level of the underpricing will be smaller too.