Economics at your fingertips  

Confucianism and IPO underpricing

Haiming Liu and Yao-Min Chiang

Pacific-Basin Finance Journal, 2022, vol. 71, issue C

Abstract: Previous studies show culture has an impact on IPO underpricing. Can Confucianism being a traditional culture system in China affect underpricing of Chinese IPOs? If yes, through what channels? This paper affirms the impact of Confucianism on IPO underpricing using a large sample in China. Results show that Confucianism can reduce IPO underpricing. This effect is more pronounced for non-state-owned firms and firms located in regions with weak investor protection. To investigate which channels of Confucianism affecting underpricing, we find that Confucianism can improve financial reporting quality and stock price informativeness, which is consistent with information asymmetry channel. We also find that Confucianism at underwriter's headquarter can decrease issuing firms' underpricing, consistent with rent seeking channel. We also find that Confucianism can reduce managers' agency costs, which is consistent with agency cost channel. Our results hold after considering alternative proxies for underpricing and proxies for Confucianism, controlling for the influence of formal institutions or other informal institutions, and employing instrumental variables in two-stage least squares regression.

Keywords: IPO underpricing; Confucianism; Informal institution; Information asymmetry; Rent seeking (search for similar items in EconPapers)
JEL-codes: G14 G15 G18 G24 G32 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1016/j.pacfin.2021.101701

Access Statistics for this article

Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee

More articles in Pacific-Basin Finance Journal from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

Page updated 2022-04-02
Handle: RePEc:eee:pacfin:v:71:y:2022:i:c:s0927538x21002080