The Green Shoe Option’s Effectiveness at Stabilizing the IPO’S Stock Price on the Indonesian Stock Exchange (2000-2013)

Siti  Saadah; Yunia Panjaitan

Siti Saadah Atma Jaya Catholic University
Yunia Panjaitan Atma Jaya Catholic University

Keywords: Initial Public Offering, Stock Price, Indonesian Stock Exchange

Abstract

The increased of price volatility due to positive initial returns will reduce investor confidence and impact on the overall market. Market stabilization mechanism is needed to control the price volatility. This research is intended to explore the effectiveness of Green-Shoe Option in reducing stock price volatility after IPO. This study is done through GARCH model development intended to identify the volatility of IPO shares price. This research compares the volatility price of company shares that apply Green shoe option at IPO with companies that do not apply it. The result of this research on companies that conduct IPO on 2000-2013 periods showed that the green shoe option stabilization program which was used by the issuers was effective in muffing the stock prices’ volatility. Therefore, according to researchers Green Shoe Option stabilization program can be used to prevent or ease the drop of shares price under Public offering.

Author Biographies

Siti Saadah, Atma Jaya Catholic University

Associate professor of applied econometrics at the Faculty of Economics Atma Jaya Catholic University, Jakarta, Indonesia. She got her bachelor degree in Economics Development at Padjajaran University Bandung, Indonesia and Master degree in Industrial Management from Institute of Technology Bandung. She got her doctoral degree in Finance from Universitas Indonesia. At present, she is also reviewer for Jurnal Ekonomi dan Bisnis at the same her institution. She has interest in Corporate Finance and Investment, some of her articles were published in some journals. One of them entitled “Capital Structure’s dynamic response to exogenous variables: A case of listed manufacturing firms in Indonesia” in International Journal of Financial Research (April, 2012); and “Response asymmetry in spillover volatility: An empirical study in the Indonesia and Singapore Stock Market,” in Indonesian Capital Market Review (Vol.5, No.2, 2013).

Yunia Panjaitan, Atma Jaya Catholic University

Vice Dean II of Faculty of Economics, Atma Jaya Catholic University. She also a lecturer of Finanacial Management and Financial Statement Analysis at the same university. She got her bachelor degree in Management from the same university, and Master degree in Financial Management from Trisakti University, Jakarta.

References

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