Loan market benefits of (High) IPO underpricing

Xunhua Su, Donghang Zhang and Xiaoyu Zhang

Journal of Financial Intermediation, 2025, vol. 61, issue C

Abstract: We provide novel evidence on the loan market benefits of high IPO underpricing. We show that greater underpricing is associated with a significantly larger within-firm reduction of post-IPO borrowing costs. This benefit of underpricing is less pronounced for firms with high ex-ante information asymmetry and is concentrated in firms with a high demand for advertisements. In addition, neither price revision before the IPO nor the short-term or long-term stock return after the IPO has a similar effect. Our results suggest that underpricing affects borrowing costs through an attention channel and highlight a real economic effect of underpricing from the loan market.

Keywords: IPO; Underpricing; Syndicated loans; Loan spreads; Borrowing costs (search for similar items in EconPapers)
JEL-codes: G20 G30 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinin:v:61:y:2025:i:c:s1042957324000603

DOI: 10.1016/j.jfi.2024.101132

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