UNDERWRITER REPUTATION, FIRM SIZE, AND IPO UNDERPRICING:EVIDENCE FROM INDONESIA FOR TRANSPARENCY AND SUSTAINABLEREPORTING

Abstract

Underpricing remains a significant issue in the Indonesian IPO market, with inconsistent findings
regarding the influence of underwriter reputation and firm size. This study aims to examine the effect
of underwriter reputation and firm size on IPO underpricing on the Indonesia Stock Exchange during
the 2023–2024 period. The study employs signaling theory as a conceptual framework, where both
variables act as quality signals for investors to reduce information asymmetry. Using multiple linear
regression with classical assumption tests, this study analyzes companies conducting IPOs within the
observation period.
The results show that underwriter reputation has a negative but statistically insignificant effect on
underpricing, indicating that it is not a dominant factor influencing investor decisions. In contrast, firm
size has a negative and significant effect, suggesting that larger companies tend to experience lower
levels of underpricing. These findings support signaling theory, where firm size serves as a credible
indicator of company quality.
This study contributes to enhancing transparency and accountability in financial reporting, which are
essential elements of sustainability-oriented accounting. Furthermore, transparent financial
information in IPO processes supports sustainable investment decisions and strengthens the
credibility of capital markets.