Global Board Reforms and the Pricing of IPOs

Yangyang Chen, Abhinav Goyal () and Leon Zolotoy

Journal of Financial and Quantitative Analysis, 2022, vol. 57, issue 6, 2412-2443

Abstract: We document that global board reforms are associated with a significant reduction in the underpricing of initial public offerings (IPOs). The effect is amplified for IPOs with greater agency problems and mitigated for IPOs certified by reputable intermediaries, IPOs with greater disclosure specificity, and IPOs in countries with better shareholder protection and stringent financial reporting regulations. Furthermore, global board reforms have led to an improvement in the long-term market performance, proceeds, and subscription level of IPOs and have enhanced board independence in the issuing firms. Our findings suggest that global board reforms have strengthened board oversight in the issuing firms, leading to less underpriced IPOs.

Date: 2022
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