Validity of Winner’s Curse Hypothesis: Evidence from Initial Public Offerings in the Indian Insurance Industry

The insurance industry is one of the prominent industries in India and it plays an important role in the nation building process and social security enhancement. It is growing at 15-20 % and it contributes nearly 4% of the GDP. It includes 57 companies, out of which 24 are life insurance companies, 31 general insurance companies and two are re-insurance companies. However, only seven are listed on the stock exchanges including LIC. In 2016, ICICI Prudential Life Insurance Ltd. became the first player to go public from the insurance industry after LIC. A large number of investors are attracted to insurance sector IPOs including institutional investors and retail investors as leading insurance companies go on public issue after 16 years of liberalization of LIC. In the two preceding years, the Indian stock market has witnessed the Initial Public Offerings of leading insurance companies. This occurred mainly due to the moderation of capital raising norms by the Insurance Regulatory and Development Authority of India (IRDAI). The present study analyses the short run secondary market performance of the recent Initial Public Offerings (IPOs) of insurance industry in India. Further, the study tests the validity of Winner’s Curse Hypothesis with regard to Insurance IPOs.