The valuation of IPOs in the European legal framework

Michele Meoli (), Stefano Paleari () and Silvio Vismara ()

No 1001, Working Papers from Department of Management, Information and Production Engineering, University of Bergamo

Abstract: We question whether an evolution in the national legal system leads to higher valuations for companies going public. We investigate this issue with reference to the population of firms going public on the main and second stock markets in the three largest economies of Continental Europe over the last fifteen years (1995-2009). We use a new dynamic measure of the evolution of the legal framework, defined as the compliance record of the Member States of the European Union. Controlling for the nature of the firm as well as for the identity of the ultimate shareholder, we find that an increase in the annual number of infringements is related to a decrease in the valuation of the firms going public. Therefore, we conclude that a higher evolution of the legal system leads to higher valuations of firms.

Pages: 19 pages
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:brh:wpaper:1001

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