Abstract
Using a large sample of 13,459 initial public offerings (IPOs) from 37 countries, we find that trading rules on market manipulation reduce IPO underpricing. The effect is weaker for IPOs certified by reputable intermediaries, in countries with greater shareholder rights protection, better financial reporting quality, and after the adoption of International Financial Reporting Standards. Better trading rules on market manipulation are also related to higher IPO proceeds, subscription-level, and trading volume, lower IPO listing fees, and better long-term post-IPO performance. Our findings are consistent with the notion that exchange trading rules mitigate information asymmetry problems for investors, resulting in lower IPO underpricing.
| Original language | English |
|---|---|
| Article number | 101846 |
| Number of pages | 20 |
| Journal | Journal of Corporate Finance |
| Volume | 67 |
| Early online date | 31 Dec 2020 |
| DOIs | |
| Publication status | Published - Apr 2021 |
Bibliographical note
Funding Information:We are grateful for the useful comments by the two anonymous referees. Veeraraghavan thanks the T A Pai Chair Professorship for funding. We thank Savitha Heggede and Meghana Mohan for excellent research assistance. The usual disclaimer applies.
Publisher Copyright:
© 2020 Elsevier B.V.
Keywords
- Exchange trading rules
- Information asymmetry
- IPO pricing
- Market manipulation
ASJC Scopus subject areas
- Business and International Management
- Finance
- Economics and Econometrics
- Strategy and Management