Underpricing and Firm’s Distance from Financial Centre: Evidence from three European Countries

Antonio Acconcia (), Alfredo Del Monte and Luca Pennacchio ()
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Alfredo Del Monte: Università di Napoli Federico II

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: We provide international evidence on the relationship between the extent of underpricing related to initial public offerings (IPOs) and the distance of the issuing firm from the financial centre of a country: for France, Germany and Italy, the higher the distance, the higher the level of underpricing. Under the maintained assumption that headquarters of institutional investors and underwriters are part of a financial centre, our evidence is consistent with the hypothesis that ex ante uncertainty regarding the value per share of an issuing firm increases with the firm’s physical distance from the underwriter. As financial centres are usually located in the richest areas of the countries concerned, spatial difference in the cost of equity financing may contribute to the persistence or the widening of local disparities.

Keywords: Asymmetric information; Distance; IPO; Underpricing (search for similar items in EconPapers)
JEL-codes: G24 O16 O18 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ure
Date: 2011-11-14
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