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Does local corruption affect IPO underpricing? Evidence from China

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  • Wang, Xin
  • Song, Di

Abstract

This study investigates the impact of local corruption on IPO underpricing. We find that compared to firms located in regions with low corruption, firms located in regions with high corruption exhibit higher IPO underpricing. In cross-sectional analysis, we find that high-reputation underwriters and auditors can attenuate the positive relationship between local corruption and IPO underpricing. In addition, we find that the positive relationship between local corruption and IPO underpricing is confined to non-state owned firms. Our study contributes to the literature on the consequences of corruption and the determinants of IPO underpricing.

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  • Wang, Xin & Song, Di, 2021. "Does local corruption affect IPO underpricing? Evidence from China," International Review of Economics & Finance, Elsevier, vol. 73(C), pages 127-138.
    • Handle: RePEc:eee:reveco:v:73:y:2021:i:c:p:127-138
    DOI: 10.1016/j.iref.2021.01.007
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    Cited by:

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    2. Wang, Feng & Chai, Wei & Yan, Bin & Shan, Jing & Fan, Wenna, 2022. "Effect of geographical distance between underwriters and listed companies on IPO underpricing: Evidence from China's A-share market," International Review of Economics & Finance, Elsevier, vol. 79(C), pages 340-352.
    3. Yang, Hao & Zhang, Qiusheng & Zhao, Xiaofang & Wang, Zhongchao, 2022. "Does political corruption affect mergers and acquisitions decisions? Evidence from China," International Review of Economics & Finance, Elsevier, vol. 78(C), pages 248-266.
    4. Khowanas Saeed Qader & Kemal Cek, 2023. "Analysis of the Impact of External Auditors’ Autonomy on Financial Accounting Information Quality Case Study Commercial Banks in Northern Iraq," Sustainability, MDPI, vol. 15(12), pages 1-21, June.
    5. Ahsan Habib & Mabel D' Costa & Ahmed Khamis Al‐Hadi, 2023. "Consequences of local social norms: A review of the literature in accounting, finance, and corporate governance," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(1), pages 3-45, March.

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    More about this item

    Keywords

    Local corruption; Information transparency; Agency problem; IPO underpricing;
    All these keywords.

    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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