Underpricing of IPOs: Firm-, issue- and country-specific characteristics

Peter-Jan Engelen () and Marc van Essen ()
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Peter-Jan Engelen: Universiteit Utrecht / Utrecht University [Utrecht]
Marc van Essen: Erasmus University Rotterdam (The Netherlands, Rotterdam) - EUR

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Abstract: Using a large firm-level dataset of 2920 IPOs from 21 countries we examine the impact of country-level institutional characteristics on the underpricing of IPOs. Through hierarchical linear modeling we are able to control for firm-specific and issue-specific characteristics and test whether country-specific institutional characteristics add explanatory power to explain the level of underpricing. Our results show that about 10% of the variation in the level of underpricing is between countries. The quality of a country's legal framework, as measured by its level of investor protection, the overall quality of its legal system and its level of legal enforcement, reduces the level of underpricing significantly.

Keywords: Investor protection; IPO; Legal framework; Multi-level modeling; Underpricing (search for similar items in EconPapers)
Date: 2010-08-01
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Published in Journal of banking & finance = Journal of banking and finance, 2010, 34 (8), pp.1958 - 1969. ⟨10.1016/j.jbankfin.2010.01.002⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05690318

DOI: 10.1016/j.jbankfin.2010.01.002

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