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Economic policy uncertainty and international IPO underpricing

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  • Boulton, Thomas J.

Abstract

I find robust evidence that elevated economic policy uncertainty (EPU) is associated with higher underpricing in a large sample of IPOs issued in 22 countries between 1998 and 2018. My baseline result indicates that a one standard deviation increase in the EPU index is associated with 1.47 percentage point larger first-day returns. This translates to an additional $1.7 million “left on the table” for the typical offering. The effect is sensitive to a variety of country characteristics including economic development, disclosure transparency, economic freedom, control of corruption, and market concentration and is weakened by the presence of reputable intermediaries. The positive relation between EPU and underpricing is not due to the spillover of global or U.S. EPU and is substantially stronger in the months leading up to a national election.

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  • Boulton, Thomas J., 2022. "Economic policy uncertainty and international IPO underpricing," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 81(C).
    • Handle: RePEc:eee:intfin:v:81:y:2022:i:c:s1042443122001615
    DOI: 10.1016/j.intfin.2022.101689
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    Keywords

    Economic policy uncertainty; Initial public offerings; Underpricing;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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