Trusting the stock market: Further evidence from IPOs around the world

Kiridaran Kanagaretnam, Jimmy Lee, Chee Yeow Lim and Gerald J. Lobo

Journal of Banking & Finance, 2022, vol. 142, issue C

Abstract: Using an international sample of IPO firms from 36 countries and a country-level index for societal trust, we find strong evidence that societal trust is negatively associated with the degree of IPO underpricing. In cross-sectional analyses, we find that the effect of societal trust in reducing IPO underpricing is more pronounced when the information environment is less transparent, when the stock market environment is less robust, and when legal institutions are weaker, settings where the effect of trust is likely to be more salient. Our study contributes to and extends the literature by providing strong evidence that an informal institution such as societal trust has an important and consistent influence on international IPO underpricing.

Keywords: Societal trust; IPO underpricing; Information environment; Stock market participation (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:142:y:2022:i:c:s0378426622001534

DOI: 10.1016/j.jbankfin.2022.106557

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