Retail Investor Participation and Protection in the Context of IPOs: A Review of Extant Literature

  • Parimala Veluvali
Part of the Advances in Theory and Practice of Emerging Markets book series (ATPEM)


Initial public offerings are an extensively researched area in the field of corporate finance. Extant literature has investigated various facets of the IPO process including the price performance, pricing mechanisms, price stabilization strategies, changing market design and the role of market participants in the IPO process. These studies have contributed to the theoretical and empirical development of subject. This chapter synthesizes the extant literature that is in line with the scope of the study, which is retail investor protection in India in the context of IPOs. By drawing upon various works that surround the theme of small investor protection in the context of the securities market, the chapter sets the background for the larger study. The chapter also explains the objectives of the study and articulates the research questions which seek to be answered. The extant literature is unanimous in upholding the cause of retail investor protection as a precondition for sustaining the growth of the market. The literature also points out to the unique requirements of the retail investors with respect to their investments in general and IPOs in particular.


Literature review Retail investors IPOs Investor protection Regulations 


  1. Aggarwal R (2003) Allocation of initial public offerings and flipping activity. J Financ Econ 68:111–135CrossRefGoogle Scholar
  2. Barber BM, Odean T (2011) The behaviour of individual investors. SSRN. Retrieved September 7, 2011 from
  3. Barth M, Landsman W, Taylor DJ (2017) The JOBS act and information uncertainty in IPO firms. The Accounting Review 92.
  4. Barrot JN, Kaniel R, Sraer D (2016) Are retail traders compensated for providing liquidity? J Financ Econ, Elsevier 120(1):146–168CrossRefGoogle Scholar
  5. Basu D (2003) Face value: creation and destruction of shareholder value in India. Ken Source Business Books, New DelhiGoogle Scholar
  6. Bose S (2005) Securities market regulations: lessons from US and Indian experience. ICRA Bull Money Finance 2:20–21Google Scholar
  7. Castro R, Clementi GL, MacDonald G (2004) Investor protection, optimal incentives, and economic growth. Q J Econ 119(3):1131–1175. Retrieved from Scholar
  8. Chickermane (2018) 70 policies that shaped India 1947 to 2017, Independence to $2.5 Trillion, Observer Research Foundation. Retrieved from
  9. Chakrabarti R et al (2014) Penetration of mutual funds in India: opportunities and challenges. Securities and Exchange Board of India. Retrieved from February, 2014
  10. Chandrasekhar CP, Malik S, Akriti (2016) The elusive retail investor: How deep can (and should) India’s stock markets be? Retrieved from
  11. Chemmanur TJ, Hu G, Huang J (2010) The role of institutional investors in initial public offerings. Rev Financ Stud 23:4496–4540CrossRefGoogle Scholar
  12. Dalal S (2011) Manifesto for retail investors and senior citizens. Retrieved from
  13. De S, Gondhi NR, Sarkar S (2011) Behavioral biases, investor performance, and wealth transfers between investor groups. Available at
  14. Freidman F, Grose C (2006) Promoting access to primary equity markets: a legal and regulatory approach. World Bank Policy Research Paper Working Series, April 2006Google Scholar
  15. Gokarn S (1996) Indian capital market reforms, 1992–96: an assessment. Econ Polit Wkly, April 13Google Scholar
  16. Gupta LC and Jain N (2008) The changing investment preferences of Indian households, SCMRD. Retrieved from
  17. Gupta LC, Gupta CP, Jain N (2001) Indian Households’ Investment Preferences (2001) Society for Capital Market Research and DevelopmentGoogle Scholar
  18. Gurunathan KB (2007) An investors’ requirements in Indian securities market. Delhi Bus Rev 8(1):31–40Google Scholar
  19. Haldea P (2017) India’s IPO mart has changed; what hasn’t is investor greed. Retrieved from June 2017
  20. Indian Equity Investor Survey (2010) By MCX-SX at p15. Retrieved from
  21. Jain V (2010) Wealth creation and destruction through initial public offerings(IPOs) in India, 2001 to 2009, Midas Touch Investor AssociationGoogle Scholar
  22. Khurshed A, Pande A, Singh AK (2009) Subscription patterns, offer prices and the underpricing of IPOs. Retrieved from
  23. Kohli V (2009) Do stock markets allocate resources efficiently? An examination of initial public offerings. Economic and Political Weekly 63–72Google Scholar
  24. Krishnan S (2002) Retail investor; an endangered species. Chartered Secretary J XV(2):58Google Scholar
  25. La Portaa R et al (2000) Investor protection and corporate governance. J Financ Econ 58(1–2):3–27CrossRefGoogle Scholar
  26. Linnainmaa J (2003) Who makes the limit order book? Implications for contrarian strategies, attention- grabbing hypothesis and the disposition effect. UnpublishedGoogle Scholar
  27. Madhusoodanan TP, Thiripalraju M (1997) Underpricing in initial public offerings: the Indian evidence. Vikalpa 22(4):17–30. Scholar
  28. Mantri R, Gupta H (2015) India’s private capital revolution. Retrieved from 10 October, 2015 private-capital-revolution.html
  29. Mayya, M.R. (1996) “Investor Protection”, Bharat Law House Pvt. Ltd., New Delhi, I Edition, p.1. Neelamegam R. and Srinivasan R. (1996) “Investors’ Protection: A Study on Legal Aspects”, Raj Publications, Delhi, I Edition.Google Scholar
  30. Nayak (2014) Of primary concerns’. Retrieved from
  31. Neelamegam R, Srinivasan R (1998) Investor’s protection: a study of legal aspects. Raj Publications, DelhiGoogle Scholar
  32. Neupane S, Poshakwale SS (2012) Transparency in IPO mechanism: retail investors’ participation, IPO pricing and returns. J Banking Finance 36(7):2064–2076CrossRefGoogle Scholar
  33. Neupane S, Rhee S, Veeraghavan M (2014) Tie-in-agreements in IPOs: evidence from India. Retrieved from
  34. Odean T (1998) Are investors ready to realize their losses? J Financ 53(5):1775–1798CrossRefGoogle Scholar
  35. Pande, Alok and Vaidyanathan,R. (2009),“Determinants of IPO Underpricing in the National Stock Exchange in India”,ICFAI Journal of Applied Finance,Vol.15,No.1,2009,pp.14-30. Google Scholar
  36. Pathak B (2011) The Indian financial system: markets, institutions and services, 3rd edn. Pearson Education, DelhiGoogle Scholar
  37. Pollack SW (2013) The role of retail investors in book built IPOs: evidence from India. Retrieved from
  38. Poudyal S (2008) Grading Initial Public Offerings (IPOs) in India’s capital markets – a globally unique concept, W.P no. 2008–12, IIM (A) (Dec, 20008), pp 1–28Google Scholar
  39. Ritter JR (1998) Initial Public Offerings. Contemporary Finance Digest 2(1):5–30Google Scholar
  40. Rock K (1986a) Why new issues are underpriced. J Financ Econ 15(1–2):187–212CrossRefGoogle Scholar
  41. Rock K (1986b) Why new issues are under priced. J Financ Econom 15(1–2):187–212CrossRefGoogle Scholar
  42. Sabrinathan G (2004) Securities Exchange Board of India and the India Capital Markets – a survey of regulatory provisions IIM Bangalore research paper no. 228. Retrieved from
  43. Sabrinathan G (2010) SEBI’s regulation of the Indian securities market: a critical review of major developments. Vikalpa 35(4):13–26Google Scholar
  44. Saha SS (2006) Book building process of public issues and merchant banking activities in the Indian primary market. The Accounting World, August, pp 54–74Google Scholar
  45. Sahoo S, Rajib P (2010). After Market Pricing Performance of Initial Public Offerings (IPOs): Indian IPO Market 2002-2006. Vikalpa: J. Decis. Makers 35:27–43Google Scholar
  46. Saroja S (1991) Emerging trends in the capital market in India. Global Business Press, New DelhiGoogle Scholar
  47. SEBI-NCAER (2000) Survey of Indian investors, 2000, SEBI- NCAERGoogle Scholar
  48. SEBI-NCAER (2011) How households sabe and invest: evidence from NCAER household survey. NCAER, New Delhi. Retrieved from Scholar
  49. Sehgal S, Sood GS, Rajput N (2009) Investor sentiment in India: a survey. Vision 13(2):13–23CrossRefGoogle Scholar
  50. Shah A (1995) The Indian IPO market: empirical facts. Retrieved from
  51. Sharma V (2013) What is driving retail investors away from the equity market? Moneylife. Retrieved from Last accessed on 28 Aug 2013
  52. Sherman AE (2004) Global trends in IPO methods: book building vs. auctions with endogenous entry. SSRN. Retrieved from December 2004
  53. Swarup D (2009) ‘Financial wellbeing’ report of the committee on investor awareness and protection. Retrieved from
  54. The Swaroop Committee (2009) ‘Financial wellbeing’ report of the committee on investor awareness and protection at. Retrieved from
  55. Varottil U (2014) The protection of minority investors and the compensation of their losses: a case study of India. NUS law working paper series, 2014/001, February, 2014.
  56. Vashisht AK, Gupta RK (2005) Investment management & stock market. Deep & Deep PublicationGoogle Scholar
  57. Veluvali (2018) Grievance redressal in the India Regulatory Landscape- the Unified Approach. In Dwivedi, Y.K., Rana, N.P., Slade, E.L., Shareef, M.A., Clement, M., Simintiras, A., Lal, B. (Eds.) Emerging Markets from a Multidisciplinary Perspective Challenges, Opportunities and Research Agenda 10.1007/978-3-319-75013-2Google Scholar
  58. Veluvali P (2014) Regulatory framework relating to investor protection with specific reference to retail investors in initial public offerings (Doctoral thesis). Symbiosis International University, Pune, India. Available at Scholar
  59. Vinayakan N (1994) A profile of Indian capital market. Kanishka Publishers, New Delhi, pp 61–62Google Scholar
  60. Vikraman S (2017) Express economic history series- 3: how ‘draconian’ FERA clause triggered flush of retail investors’. Retrieved from 5 April, 2017
  61. Wadhwa Committee Report, (2007), 'Report of The Committee On reallocation of shares in the matter of IPO irregularities' retrieved from Scholar

Copyright information

© Springer Nature Switzerland AG 2019

Authors and Affiliations

  • Parimala Veluvali
    • 1
  1. 1.Symbiosis Centre for Management StudiesSymbiosis International (Deemed University)PuneIndia

Personalised recommendations