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Title:Do differences in institutional and legal environments explain cross-country variations in IPO underpricing? PDF Logo
Authors:Hopp, Christian
Dreher, Axel
Issue Date:2007
Series/Report no.:KOF working papers // Konjunkturforschungsstelle, Eidgenössische Technische Hochschule Zürich 172
Abstract:We empirically analyze the determinants of Initial Public Offering (IPO) underpricing using panel data for 29 countries over the period 1988-2005. Our hypotheses stress the importance of institutional and legal factors in explaining cross-country variations. We find that increased protection of shareholders and greater accounting transparency contribute negatively to variations in underpricing. When more information is available price discovery is facilitated, allowing for more effective corporate governance. Moreover, when equity markets perform well, investors anticipate companies and investment banks to time the market and require higher underpricing in return. Overall, we conclude that better investor protection and better institutional environments reduce the perceived risk of investing, and attenuate the problem of asymmetric information, thereby causing lower underpricing across countries.
Subjects:IPO underpricing
institutions
legal infrastructure
panel data
JEL:G15
H2
G1
Persistent Identifier of the first edition:doi:10.3929/ethz-a-005430983
Document Type:Working Paper
Appears in Collections:KOF Working Papers, KOF Konjunkturforschungsstelle, ETH Zürich

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