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Financial institution IPOs and regulatory environments

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  • Killins, Robert N.
  • Ngo, Thanh
  • Wang, Hongxia

Abstract

We examine underpricing and long term performance of financial institution IPOs around major regulatory changes and during the balance of political power in the United States. We find higher underpricing and lower long term performance post Riegle-Neal Interstate banking, Financial Services Modernization, and Dodd-Frank Acts, supporting the Regulatory Burden hypothesis that investors account for incremental regulation-related costs in their investment decisions. We document less underpricing and better long-term performance during the Democratic balance of power, but more underpricing and lower long-term performance during the Republican balance of power. This study provides important insights for investors, financial institutions, and regulators.

Suggested Citation

  • Killins, Robert N. & Ngo, Thanh & Wang, Hongxia, 2022. "Financial institution IPOs and regulatory environments," Finance Research Letters, Elsevier, vol. 46(PB).
    • Handle: RePEc:eee:finlet:v:46:y:2022:i:pb:s1544612321004785
    DOI: 10.1016/j.frl.2021.102503
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    More about this item

    Keywords

    Financial institution IPOs; Underpricing; Long-term performance; Regulations; Balance of power;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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