Effectiveness of Green Shoe Option as a Technique of Price Stabilization in India

Dr. Sarbapriya Ray


Abstract: The primary market of shares and securities where Initial public offerings (IPO) of securities are issued, contributes a vital role in the financial development of an economy by means of mobilizing financial resources from the public and investing this resources in various developmental projects of the economy. Investors would undoubtedly be worried if the price of the shares in the secondary market is gradually declining or highly unpredictable in the period immediately following the listing date. The Green Shoe Option (GSO) is one of the price stabilization mechanisms newly came into force since 2003 by which such situation should be managed. This study attempts to assess the effectiveness of Green Shoe Option (GSO) as a technique of price stabilization in India by means of analyzing the mechanism through which GSO works.


Keywords: Green Shoe Option, India, IPO, Primary market.

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