Shariah-compliant status and investors’ demand for IPOs: the effects of information asymmetry Ahmad Hakimi Tajuddin School of Finance and Economics, Taylor’s University, Subang Jaya, Malaysia Rasidah Mohd Rashid School of Economics, Finance and Banking, Universiti Utara Malaysia, Sintok, Malaysia Karren Lee-Hwei Khaw Faculty of Business and Accountancy, University of Malaya, Kuala Lumpur, Malaysia, and Norliza Che Yahya Faculty of Business Management, Universiti Teknologi MARA, Shah Alam, Malaysia Abstract Purpose – The purpose of this paper is to investigate the effects of Shariah-compliant status and the presence of information asymmetry on investors’ demand for initial public offerings (IPOs) in Malaysia. Design/methodology/approach – The data regarding 260 IPOs dated for a duration of 11years were acquired from the websites of Bursa Malaysia and Malaysian Issuing House. In evaluating the association between IPO oversubscription and the independent variables in this study, multivariate and quantile regression analyses were implemented. Findings – It was found that Shariah-compliant status (DSHARIAH) had a significant positive relationship with IPO oversubscription. With this, it was indicated that Shariah-compliant status gains investors’ interests in subscribing to IPOs as these shares could be distributed to a wider group of investors. In the case of the proxies of information asymmetry, although firm size posed significant effects on IPO oversubscription, the effects were negative. Meanwhile, institutional investors posed significant positive effects on IPO oversubscription. Furthermore, it was indicated from the negative effects of firm size that less subscription is received by large firms which are perceived to possess lower information asymmetry from the investors. This is owing to the less underpricing provided by the issuers for their IPOs. However, it was indicated from the significant positive association between institutional investors and IPO oversubscription that the participation in the IPO among institutional investors would enhance the enthusiasm of investors for a specific stock and increase the probability of IPO oversubscription. With this, the winner’s curse hypothesis was supported. Research limitations/implications – It is recommended that future studies investigate the compliance aspect, specifically the financial and nonfinancial aspects which may affect investors’ decision-making process for their investment. JEL classification – G00, G01, G12, G23 The authors would like to acknowledge the research support from Fundamental Research Grant Scheme (FRGS/1/2018/SS01/UUM/02/7) (S/O Code: 14203) provided by the Ministry of Higher Education, Malaysia. The authors thank the anonymous referees for their constructive comments. Shariah- compliant status 489 Received 20 January 2019 Revised 28 April 2019 Accepted 19 May 2019 International Journal of Islamic and Middle Eastern Finance and Management Vol. 12 No. 4, 2019 pp. 489-508 © Emerald Publishing Limited 1753-8394 DOI 10.1108/IMEFM-01-2019-0026 The current issue and full text archive of this journal is available on Emerald Insight at: www.emeraldinsight.com/1753-8394.htm