The impact of public ownership and share warrants on market performance of IPOs: Evidence from the Indonesian Stock Exchange (IDX)

The aim of this study is to examine the relationship between public ownership (public float), share warrants and the market performance of IPOs on the Indonesia Stock Exchange (IDX). The public ownership is measured as the percentage of shares held by the public after the IPO, share warrants are measured as dummy variables, and market performance is measured by both initial returns and 36 months cumulative abnormal returns. The test is conducted by OLS and Quantile Regression to find out whether the percentage of shares held by the public after the IPOs and warrants offering have relationships with both the initial and the long-term shares market performance. The sample consists of 124 IPOs companies during 2009-2014. OLS shows not only that public float and warrant offerings are related to initial returns, but also warrants mediate the relationships between public float and initial performance. The analysis with quantile regression shows that the positive relationship between public float and short-term market performance occurs in the IPO with middle-level initial returns (i.e. between 40th to 60th quantiles). The effect of warrant offerings on initial returns simply does not appear on the lower quantiles (10th through 30th quantiles). We find no relationships between public float and warrant offerings with the long-term market performance, which gives an indication that warrant offerings in Indonesia are a form of staged financing policy.