TY - JOUR
T1 - Democracy and the pricing of initial public offerings around the world
AU - Duong, Huu Nhan
AU - Goyal, Abhinav
AU - Kallinterakis, Vasileios
AU - Veeraraghavan, Madhu
N1 - Funding Information:
We are grateful to an anonymous referee for the insightful comments and suggestions, which have significantly improved the paper. Veeraraghavan thanks the T A Pai Chair Professorship for funding support. We thank Savitha Heggede and Meghana Mohan for excellent research assistance. All errors are our own.
Publisher Copyright:
© 2021
PY - 2022/7
Y1 - 2022/7
N2 - We find a negative relation between democracy and initial public offering (IPO) underpricing for a sample of 23,050 IPOs across 45 countries. The effect of democracy on underpricing is weaker for IPOs audited by Big 4 auditing firms, backed by venture capital firms, and with better disclosure specificity of use of proceeds. Democracy exerts a larger influence on underpricing for firms with higher agency problems, in countries with weaker institutional quality or shareholder protection, and during periods of high investor sentiment or economic policy uncertainty. Overall, our results highlight the importance of democracy in reducing IPO underpricing around the world.
AB - We find a negative relation between democracy and initial public offering (IPO) underpricing for a sample of 23,050 IPOs across 45 countries. The effect of democracy on underpricing is weaker for IPOs audited by Big 4 auditing firms, backed by venture capital firms, and with better disclosure specificity of use of proceeds. Democracy exerts a larger influence on underpricing for firms with higher agency problems, in countries with weaker institutional quality or shareholder protection, and during periods of high investor sentiment or economic policy uncertainty. Overall, our results highlight the importance of democracy in reducing IPO underpricing around the world.
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U2 - 10.1016/j.jfineco.2021.07.010
DO - 10.1016/j.jfineco.2021.07.010
M3 - Article
AN - SCOPUS:85112073861
SN - 0304-405X
VL - 145
SP - 322
EP - 341
JO - Journal of Financial Economics
JF - Journal of Financial Economics
IS - 1
ER -