THE INFLUENCE OF UNDERWRITER REPUTATIONTO INITIAL PUBLIC OFFERINGS UNDERPRICING

Abstract

Underpricing is one of the Initial Public Offering phenomenon that commonly happens around the world, include in Indonesia. The level of underpricing also various from low level to high level. One of the factors that determined the level of underpricing is underwriter reputation. Underwriter as a guarantor will be determined the Initial Public Offering price which is used in the primary market. This research is to analyze the influence of underwriter reputation to Initial Public Offering underpricing in all companies that listed on Indonesia Stock Exchange from 2011 – 2014. There are 76 companies out of 100 companies who experienced underpricing in period 2011-2014. In this research, the underwriter reputation will be measured by total trading volume and total trading frequency. The dependent variable is the Initial Public Offering underpricing and the independent variable is underwriter reputation in total trading volume and underwriter reputation in total trading frequency. This research used coefficient correlation method to analyze the significance relationship between the dependent and independent variables. This research also uses the regression method to analyze the hypothesis testing. Each of underwriter reputation in total trading volume and total trading frequency has different result. The most reputable underwriter reputation in total trading frequency has negative significant relationship to the Initial Public Offering underpricing. Meanwhile, the underwriter reputation in total trading volume has insignificant relationship to the Initial Public Offering underpricing. Therefore, the underwriter reputation simultaneously has the effect of 7.9% to Initial Public Offering underpricing. The better reputation of underwriter will reduce the gap of asymmetric information and it will lower the level of the underpricing too.