Skewness preference and IPO underpricing: International evidence

Eunyoung Cho and Woojin Kim

Research in International Business and Finance, 2023, vol. 66, issue C

Abstract: This paper examines the impact of expected skewness on IPO underpricing based on a comprehensive set of IPOs from 23 countries. We find that IPOs with high expected skewness at both industry-level and market-level exhibit significantly higher first-day returns, which is more pronounced in countries with relatively higher litigation risk, higher gambling propensity, a larger non-religious population, and a more individualistic culture. Moreover, IPOs with high expected skewness significantly underperform those with low expected skewness over a longer horizon. Our results suggest that a key friction that prevents issuers from taking advantage of such skew preference may be the legal risk involved with potential overpricing.

Keywords: IPO; Skewness preference; Lottery; Underpricing; International stock markets (search for similar items in EconPapers)
JEL-codes: G32 G41 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:66:y:2023:i:c:s0275531923001800

DOI: 10.1016/j.ribaf.2023.102054

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