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Enterprise digital transformation and IPO pricing efficiency: Evidence from IPO primary and secondary markets

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  • He, Yanan
  • Wu, Yifan
  • Zheng, Kai

Abstract

While digital transformation is widely regarded as a key corporate strategy, its impact on capital market activities at the initial public offering (IPO) stage remains underexplored. This study investigates how digital transformation disclosures in IPO prospectuses affect pricing efficiency in China’s A-share markets from 2011 to 2022. By decomposing overall underpricing, we find a nuanced dual effect: digital transformation has no significant impact on pricing in the institution-dominated primary market but significantly exacerbates underpricing in the retail-investor-driven secondary market. Economically, a one-standard-deviation increase in the digital narrative is associated with a 39.90% rise in secondary market underpricing. Mechanism analysis confirms that this effect operates primarily through amplified investor sentiment. Furthermore, this phenomenon is more pronounced in non-state-owned enterprises and non-high-tech firms, highlighting the critical roles of ownership structure, signal credibility, and pre-existing investor expectations shaped by a firm’s technological identity. Our findings resolve a theoretical puzzle by integrating signaling theory with behavioral finance and offer practical implications for investors and regulators in the digital age.

Suggested Citation

  • He, Yanan & Wu, Yifan & Zheng, Kai, 2026. "Enterprise digital transformation and IPO pricing efficiency: Evidence from IPO primary and secondary markets," Finance Research Letters, Elsevier, vol. 89(C).
    • Handle: RePEc:eee:finlet:v:89:y:2026:i:c:s1544612325026042
    DOI: 10.1016/j.frl.2025.109355
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    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • 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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