Underpricing of IPOs: Firm-, issue- and country-specific characteristics |
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Authors: | Peter-Jan Engelen Marc van Essen |
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Institution: | 1. Utrecht University, School of Economics, Utrecht, The Netherlands;2. Erasmus University, Rotterdam School of Management, Rotterdam, The Netherlands |
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Abstract: | Using a large firm-level dataset of 2920 IPOs from 21 countries we examine the impact of country-level institutional characteristics on the underpricing of IPOs. Through hierarchical linear modeling we are able to control for firm-specific and issue-specific characteristics and test whether country-specific institutional characteristics add explanatory power to explain the level of underpricing. Our results show that about 10% of the variation in the level of underpricing is between countries. The quality of a country’s legal framework, as measured by its level of investor protection, the overall quality of its legal system and its level of legal enforcement, reduces the level of underpricing significantly. |
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Keywords: | G30 G32 G38 K22 |
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