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Underpricing of IPOs and Legal Frameworks Around the World

Author

Listed:
  • Peter-Jan Engelen

    (Universiteit Utrecht / Utrecht University [Utrecht])

  • Marc van Essen

    (Erasmus University Rotterdam (The Netherlands, Rotterdam) - EUR)

Abstract

This paper analyzes the relationship around the world between the underpricing of IPOs and a country's legal framework. From the theoretical research we expect a negative relationship between a higher level of investor protection (and other measures of a country's legal framework) and the level of underpricing. The empirical results support our expectations and show a negative relationship between a country's legal framework and the underpricing of IPOs. In this way, this study adds to the growing law and finance literature. Firms in countries with stronger investor protection (and other measures of the country's legal framework) have, ceteris paribus, lower costs to go public, and thus an international advantage in comparison to firms from other countries with less developed legal frameworks.

Suggested Citation

  • Peter-Jan Engelen & Marc van Essen, 2008. "Underpricing of IPOs and Legal Frameworks Around the World," Post-Print hal-05690316, HAL.
    • Handle: RePEc:hal:journl:hal-05690316
    DOI: 10.2202/1555-5879.1238
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