This paper examines how underwriter reputation influences the retail demand for SME IPOs in India. Additionally, we unearth the impact of underwriter reputation and retail demand on the initial and aftermarket performance of SME IPOs. Using sample data of 610 SME IPOs from 2012 to 2021, we found that retail investors rely on external signals, particularly those from underwriters, to make investment decisions. Moreover, IPOs backed by reputed underwriters exhibit superior performance in the long run. In addition, we observe a positive association between retail demand and initial return. However, this relationship does not translate into long-term performance, emphasizing the challenge retail investors face in accurately assessing the long-term prospects of IPOs.
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