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Global diversification and IPO returns

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  • Mauer, David C.
  • Wang, Song
  • Wang, Xiao
  • Zhang, Yilei

Abstract

A large number of newly listed firms have significant involvement in international business activity. In this paper, we examine the effect of international business activity on the pricing of initial public offerings (IPOs), post-IPO performance, and survival. In a large sample of U.S. IPOs over 1981–2012, we find that firms with exports and/or foreign sales prior to going public have significantly lower underpricing than firms without international business activity. Furthermore, firms with international business activity significantly outperform purely domestic IPO firms over 3- and 5-year periods after going public and have a significantly higher survival rate. Overall, we provide strong evidence that global diversification has an economically significant effect on the valuation and subsequent performance of firms going public.

Suggested Citation

  • Mauer, David C. & Wang, Song & Wang, Xiao & Zhang, Yilei, 2015. "Global diversification and IPO returns," Journal of Banking & Finance, Elsevier, vol. 58(C), pages 436-456.
    • Handle: RePEc:eee:jbfina:v:58:y:2015:i:c:p:436-456
    DOI: 10.1016/j.jbankfin.2015.05.015
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    More about this item

    Keywords

    Initial public offering; Global diversification; IPO underpricing; IPO long-run performance; Survival analysis;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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