Review Reports - Do Share Allocations to the Indigenous Investor Drive the Demand for IPOs?

Round 1

Reviewer 1 Report

I think the paper is interesting

i was hoping to learn more about issues of going public too early depending on the indigenous role. Sore for example https://doi.org/10.1016/j.irle.2009.12.001

I wonder if the results are attributable to a role of corporate culture diversity? see for example http://dx.doi.org/10.1561/114.00000016

also thought the economic significance or the size of the effects could be better described.

I hope these comments are helpful

Author Response

The authors would like to thank reviewers for the constructive comments that potentially enhance manuscript writing. Referring to the comments we have revised the manuscript to address the comments raised. Our responses to the comments are highlighted in YELLOW in the paper. Below are our responses to the detailed comments made by the editor and reviewer(s).

Reviewer 1	Author’s response
-I think the paper is interesting -I was hoping to learn more about issues of going public too early depending on the indigenous role. Sore for example https://doi.org/10.1016/j.irle.2009.12.001	We would like to express gratitude to the reviewer for recognizing the importance of the research and offering suggestions to enhance the paper's quality to meet publication criteria. We have carefully taken into account all the reviewer's feedback and made the necessary revisions. We hope that the manuscript meets the journal's standards and is accepted for publication. We appreciate the opportunity to revise and improve their paper.
I wonder if the results are attributable to a role of corporate culture diversity? see for example http://dx.doi.org/10.1561/114.00000016 also thought the economic significance or the size of the effects could be better described.	Thank you for the suggestion. The study does not directly investigate the role of corporate culture diversity on the oversubscription in the Malaysian IPO market. However, corporate culture diversity may play a role in determining investor demand and oversubscription in the IPO market. Diversity in corporate culture can enhance the creativity and innovation of firms, leading to a higher level of performance, which could potentially attract more investors to participate in the IPO. In contrast, lack of diversity in corporate culture could lead to poor performance, which could reduce investor interest in the IPO. Moreover, the presence of diverse cultures in a company could also increase the company's appeal to a wider range of investors, potentially leading to higher oversubscription rates. Therefore, while the current study did not directly investigate the impact of corporate culture diversity on oversubscription in the Malaysian IPO market, it is possible that such factors could be playing a role in shaping investor demand and oversubscription. Further research is needed to explore this potential relationship. Thus, we have taken the suggestions and acknowledge the effect of diversity in culture in the limitation.
Also thought the economic significance or the size of the effects could be better described.	Thank you for the suggestion. The study provides some evidence of the economic significance of the effects observed in the Malaysian IPO market. Specifically, the study finds that the revised Bumiputera equity requirement from 30% to 12.5% has a significant negative effect on the demand for IPOs. The size of this effect is not directly reported in the study, but the significant negative effect suggests that the change in the equity requirement has a meaningful impact on investor demand. Additionally, the study finds a significant and positive link between the interaction term (BEQ × MCAP) and investor demand, indicating that investors' demand for an IPO is significantly higher for companies seeking listing on the Main Market but mitigated by market capitalisation. While the size of the effect is not explicitly reported, the significant positive effect suggests that the interaction term has a meaningful impact on investor demand. Overall, the study provides evidence of significant effects on investor demand in the Malaysian IPO market, indicating that factors such as the Bumiputera equity requirement and market capitalisation can have a meaningful impact on oversubscription rates.

Reviewer 2 Report

This study examines the implication of IPO allocation in the context of emerging economies. The study seems to be fine with the require criteria of scientific publication. However, following steps could be taken to further improve the manuscript.

(1) there seems to be high correlation among independent variables. Therefore, the VIF factor can be reported. The author can also take step wise regression approach and not to include all variables in one estimation regression.

(2) The author should also report the results using an alternative estimation approach, i.e., cross sectional or panel regression. This can be used as a robustness test. This will build up the credentials of the results.

(3). the author should include the alternative methodology in the empirical result discussion section.

(4) A section/paragraph could be added in the Introduction and conclusion section to highlight policy implications.

(5) the English language needs proof editing to improve the quality of communication.

(6) A brief table in the literature review section can be added to highlight the rules in other Asian and emerging economies for the IPO allocation. This will help to establish the contextual difference in the context of the specific country for which this study has been conducted. This will also help the reader to appreciate the divergence of rules across other countries and why a generalization is complex. Therefore, this study will add value to our understanding.

Author Response

Reviewer 2	Author’s response
There seems to be high correlation among independent variables. Therefore, the VIF factor can be reported. The author can also take step wise regression approach and not to include all variables in one estimation regression.	We have checked the VIF and it is within the range, which shows there are no high correlation among variables. Further we have reported the VIF in Table 3.
The author should also report the results using an alternative estimation approach, i.e., cross sectional or panel regression. This can be used as a robustness test. This will build up the credentials of the results.	We appreciated the comments given, we have added additional test in Table 3, Table 6 and Table 7 for robustness. However, we can’t run the panel regression as the data is cross sectional.
The author should include the alternative methodology in the empirical result discussion section.	Thank you for the suggestion. We have included the alternative methodology as per suggested under the methodology heading. We have added the least square with breakpoints test and Wilcoxon Mann-Whitney test.
A section/paragraph could be added in the Introduction and conclusion section to highlight policy implications.	Thank you for the suggestion and we have included the policy implications under the Introduction and conclusion.
The English language needs proof editing to improve the quality of communication.	We have sent the article for proofreading.
A brief table in the literature review section can be added to highlight the rules in other Asian and emerging economies for the IPO allocation. This will help to establish the contextual difference in the context of the specific country for which this study has been conducted. This will also help the reader to appreciate the divergence of rules across other countries and why a generalization is complex. Therefore, this study will add value to our understanding.	Thank you for the suggestion and we have added a table (Table 1) to highlight the rules of IPO allocation in Asian countries.

Round 2

Reviewer 1 Report

Thanks for replying to my prior comments - but you seemed to miss my first comment on going public too early in your reply letter

the idea that those things could be done in future work is interesting

but what you should do in that case is discuss future research opportunities in the paper and perhaps reference the papers that I suggested (not my papers) that could inform future research. And/or you might reference other helpful papers.

I hope the prior comments were helpful. Likewise I hope this future research section is also helpful

Author Response

Reviewer 1

Author’s response

-I think the paper is interesting

-I was hoping to learn more about issues of going public too early depending on the indigenous role. Sore for example https://doi.org/10.1016/j.irle.2009.12.001

We have added the issues of going public too early and the indigenous role under the conclusion heading as follows:

There may be policies or regulations in some countries or regions that require companies to allocate a certain percentage of their shares to indigenous or minority groups. The company's ability to fulfil these obligations and its relationship with indigenous or minority communities could be harmed if it goes public before satisfying these requirements (Johan, 2010). Thus, the potential repercussions of an early IPO on an indigenous role would depend on the country's or region's particular policies, regulations, and conditions.

Apologies; we missed this part in the first revision. Thank you for giving us the opportunity.

I wonder if the results are attributable to a role of corporate culture diversity? see for example http://dx.doi.org/10.1561/114.00000016

also thought the economic significance or the size of the effects could be better described.

We have added the suggested arguments on the cultural diversity under the conclusion heading as follows:

Zhang (2022) suggest that national culture plays a significant role in determining the corporate capital structure. Thus, we argue culture can influence the way a company operates and makes decisions, including its financial decisions such allocation decisions.

Thank you for the suggestion.