TY - JOUR
T1 - Cross-country IPOs
T2 - What explains differences in underpricing?
AU - Banerjee, Suman
AU - Dai, Lili
AU - Shrestha, Keshab
PY - 2011/12
Y1 - 2011/12
N2 - We study the impacts of country-level information asymmetry, investors' home-country bias, effectiveness of contract enforcement mechanisms, and accessibility of legal recourse on IPO underpricing in 36 countries around the globe. We find evidence consistent with all four of our hypotheses. First, we find a positive and significant effect of country-level information asymmetry on IPO underpricing. Second, our empirical evidence is consistent with the agency-cost-based explanation of IPO underpricing. We find that lower cost to entice the block holders, measured by domestic investors' home-country bias, reduces IPO underpricing. Third, we find that effective contract enforcement mechanisms help to reduce IPO underpricing. Finally, we find a positive relation between the accessibility of legal recourse and IPO underpricing.
AB - We study the impacts of country-level information asymmetry, investors' home-country bias, effectiveness of contract enforcement mechanisms, and accessibility of legal recourse on IPO underpricing in 36 countries around the globe. We find evidence consistent with all four of our hypotheses. First, we find a positive and significant effect of country-level information asymmetry on IPO underpricing. Second, our empirical evidence is consistent with the agency-cost-based explanation of IPO underpricing. We find that lower cost to entice the block holders, measured by domestic investors' home-country bias, reduces IPO underpricing. Third, we find that effective contract enforcement mechanisms help to reduce IPO underpricing. Finally, we find a positive relation between the accessibility of legal recourse and IPO underpricing.
KW - Home-country bias
KW - IPO underpricing
KW - Information asymmetry
KW - Law enforcement
KW - Litigation risk
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U2 - 10.1016/j.jcorpfin.2011.06.004
DO - 10.1016/j.jcorpfin.2011.06.004
M3 - Article
AN - SCOPUS:80051594229
SN - 0929-1199
VL - 17
SP - 1289
EP - 1305
JO - Journal of Corporate Finance
JF - Journal of Corporate Finance
IS - 5
ER -