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High-quality issuing firms with encouraging inside information regarding their prospect will use signalling to differentiate their issues from low-quality issuing firms and convince prospective investors regarding the value of their firm. Hence, the present study investigates the dominant signals in explaining the initial return in the Malaysian IPO market. The study investigates the following signalling variables: Lock-up period, shareholder retention ratio, underwriter reputation, auditor reputation and board reputation. Moreover, the current study also uses the stepwise regression analysis to know the order of contribution of the signalling variables to the overall model. The results of the regression analysis show that three signals out of five have a significant relationship with the initial return. Furthermore, the stepwise regression shows their order of contribution, where shareholder retention ratio is ranked first, followed by auditor reputation and board reputation. The outcomes of the present study offer new evidence regarding the kind of information that investors should be concerned with when evaluating IPOs and making decisions concerning investment in the Malaysian IPO market. [ABSTRACT FROM AUTHOR]

Purpose – The purpose of this paper is to investigate the initial return patterns of Malaysian initial public offerings (IPOs) and whether shari'a-compliant status would alter such patterns. Design/methodology/approach – The effect of shari'a-compliant status on the patterns of initial return of IPOs is analyzed using a sample of 386 IPOs issued between January 1999 and December 2007. Findings – The preliminary results indicate that over the study period, the initial returns of Malaysian IPOs drop substantially from 94.91 percent reported from the pre-crisis period of 1990-1998 to 31.99 percent, a level more comparable to that reported in advanced markets. Since the initial returns do not revert to pre-crisis levels, the new low IPO underpricing trend is more likely to be associated with the removal of pricing restraints. The results of regression analyses on the full sample, however, suggest that there is no drastic change with respect to factors that drive initial returns in Malaysian IPOs. With regards to shari'a-compliant status, IPOs of this subsample show similar profiles to those of non-shari'a counterparts. However, other than demand, the two subsamples are driven by different factors. Initial returns of shari'a-compliant IPOs are driven by the size and type of offers, whereas those of the non-shari'a IPOs are driven by risks. Research limitations/implications – Future studies should re-examine the issue by taking into consideration the extensiveness of a firm's compliance to shari'a rules and other predictor variables. Originality/value – This paper is one of the first to examine the effect of shari'a-compliant status on the performance of IPOs. [ABSTRACT FROM AUTHOR]