Distance, transportation and the underpricing of IPOs

Zhangkai Huang (), Jinyu Liu and Guangrong Ma
Additional contact information
Zhangkai Huang: Tsinghua University
Jinyu Liu: University of International Business and Economics
Guangrong Ma: Renmin University

Review of Quantitative Finance and Accounting, 2019, vol. 52, issue 4, No 3, 1009 pages

Abstract: Abstract This paper examines the influence of the firm’s location on IPO underpricing using data from the Chinese stock market. We find that geographical proximity to major metropolitan areas reduces the magnitude of IPO underpricing: the distance between the firm and the major metropolitan areas is positively related to the market-adjusted first-day return of the IPO firm. Information opacity further magnifies the geographical effects. Furthermore, we find that China’s recent development of the national bullet train system mitigates the influence of geographical location on IPO underpricing. We apply an instrumental variable approach and a placebo test to address robustness issues.

Keywords: Distance; Information costs; Bullet train; IPO underpricing (search for similar items in EconPapers)
JEL-codes: G10 G30 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s11156-018-0733-6

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