Underpricing of IPOs: Firm-, issue- and country-specific characteristics

Peter-Jan Engelen and Marc van Essen

Journal of Banking & Finance, 2010, vol. 34, issue 8, 1958-1969

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.

Keywords: IPO; Underpricing; Legal; framework; Investor; protection; Multi-level; modeling (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (75)

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