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The collateral damage in IPO Pricing: Evidence from corporate bond default events of China

Author

Listed:
  • Wu, Aimin
  • Dong, Dayong
  • Cao, Jiawei
  • Yang, Jinyu
  • Ling, Chuanqi

Abstract

In this study, we examine the impact on an initial public offering (IPO) firm’s underpricing when there are corporate bond default cases of other companies in the IPO firm’s registered location. Using Chinese IPO firms from 2014 to 2023, we find that when corporate bond defaults of other companies occur in the registered location of an IPO firm, these defaults will exacerbate its IPO underpricing. Our mechanism analysis reveals that when corporate bond defaults of other companies occur in the registered location of an IPO firm, such defaults will increase the IPO underpricing by reducing the level of attention from retail investors and intensifying investors divergence. Furthermore, we also find that for IPO firms that choose underwriters with a high reputation or whose registered locations are in cities that are neither municipalities directly under the central government nor provincial capitals, their IPO underpricing is more significantly affected by corporate bond default events of other local companies. Finally, we provide corresponding suggestions for the government, IPO firms, and investors.

Suggested Citation

  • Wu, Aimin & Dong, Dayong & Cao, Jiawei & Yang, Jinyu & Ling, Chuanqi, 2026. "The collateral damage in IPO Pricing: Evidence from corporate bond default events of China," The North American Journal of Economics and Finance, Elsevier, vol. 85(C).
    • Handle: RePEc:eee:ecofin:v:85:y:2026:i:c:s1062940826000847
    DOI: 10.1016/j.najef.2026.102662
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    Keywords

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    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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