The impact of institutional quality on initial public offerings

Don M. Autore, Thomas J. Boulton, Scott B. Smart and Chad J. Zutter

Journal of Economics and Business, 2014, vol. 73, issue C, 65-96

Abstract: Country-level institutional quality is positively correlated with the underpricing of initial public offerings (IPOs). The association is strong for IPOs issued in developed markets, but absent for emerging-market IPOs. We hypothesize that extra-legal institutions, including financial reporting practices, law enforcement, public trust, and outside monitoring affect the availability and value of private benefits of control accessible to entrepreneurs, which in turn shapes the relation between institutional quality and IPO underpricing. Evidence on the relation between underpricing and post-IPO ownership dispersion is consistent with prior studies that suggest that underpricing is motivated, at least in part, by entrepreneurs’ desire for post-IPO control.

Keywords: Governance; Initial public offerings; International finance; Investor protection (search for similar items in EconPapers)
JEL-codes: G15 G24 G30 G32 G34 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jebusi:v:73:y:2014:i:c:p:65-96

DOI: 10.1016/j.jeconbus.2014.01.002

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