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Underpricing of IPOs: Firm-, issue- and country-specific characteristics

Author

Listed:
  • Peter-Jan Engelen

    (Universiteit Utrecht / Utrecht University [Utrecht])

  • Marc van Essen

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

Abstract

Using a large firm-level dataset of 2920 IPOs from 21 countries we examine the impact of country-level institutional characteristics on the underpricing of IPOs. Through hierarchical linear modeling we are able to control for firm-specific and issue-specific characteristics and test whether country-specific institutional characteristics add explanatory power to explain the level of underpricing. Our results show that about 10% of the variation in the level of underpricing is between countries. The quality of a country's legal framework, as measured by its level of investor protection, the overall quality of its legal system and its level of legal enforcement, reduces the level of underpricing significantly.

Suggested Citation

  • Peter-Jan Engelen & Marc van Essen, 2010. "Underpricing of IPOs: Firm-, issue- and country-specific characteristics," Post-Print hal-05690318, HAL.
    • Handle: RePEc:hal:journl:hal-05690318
    DOI: 10.1016/j.jbankfin.2010.01.002
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