EconPapers    
Economics at your fingertips  
 

The decision to go public and the IPO underpricing with locally biased investors

Giulia Baschieri, Andrea Carosi () and Stefano Mengoli

The European Journal of Finance, 2021, vol. 27, issue 15, 1489-1532

Abstract: We provide new evidence that local investors are peculiarly biased towards local IPO stocks. Taking the well-known investor preference for local stocks a step further, we contribute by showing that local IPOs boost stock market participation far more intensely than local listed firms. Interestingly, the effect is driven by individuals born and raised in the region, having zero effect for those who have moved to the area. Consistent with underwriters significantly under-estimating the local investors’ demand in local IPOs, the probability of a private firm to go public, the IPO underpricing and the cross-sectional volatility of IPO initial returns, increase in remote firms where the local investors’ demand in local IPOs is particularly high. Overall, our results suggest that local investors are crucial for the IPO decision.

Date: 2021
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://hdl.handle.net/10.1080/1351847X.2021.1890632 (text/html)
Access to full text is restricted to subscribers.

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: https://EconPapers.repec.org/RePEc:taf:eurjfi:v:27:y:2021:i:15:p:1489-1532

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/REJF20

DOI: 10.1080/1351847X.2021.1890632

Access Statistics for this article

The European Journal of Finance is currently edited by Chris Adcock

More articles in The European Journal of Finance from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().

 
Page updated 2022-08-02
Handle: RePEc:taf:eurjfi:v:27:y:2021:i:15:p:1489-1532