Governance Signals and IPO Underpricing: Evidence from Indian SME Markets

Abstract
This study explores the relationship between corporate governance
mechanisms and listing price performance of Small and Medium Enterprise
(SME) Initial Public Offerings (IPOs) in India. Using a sample of 940 SME
IPOs listed on BSE SME and NSE EMERGE platforms from February 2012
to March 2024, the study examines how board structure and ownership
characteristics influence IPO underpricing, measured through raw returns
and market-adjusted excess returns. Governance variables such as board
size, independence, gender diversity, board reputation, and promoter
ownership are analyzed using statistical techniques including t-tests, Mann-
Whitney U tests, and chi-square tests. The findings reveal that certain
governance factors exhibit nonlinear relationships with listing returns,
while most associations remain statistically insignificant. The results
suggest that although corporate governance acts as a signaling mechanism
to reduce information asymmetry, its impact on SME IPO performance
is limited. The study highlights the need to consider broader market and
firm-specific factors.