Democracy and the pricing of initial public offerings around the world

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Democracy and the pricing of initial public offerings around the world

Duong, Huu Nhan; Goyal, Abhinav; Kallinterakis, Vasileios; Veeraraghavan, Madhu
Date: 2021-07-23
Copyright: © 2021, Elsevier B.V. All rights reserved. This manuscript version is made available under the CC BY-NC-ND 4.0 license.
Copyright information: https://creativecommons.org/licenses/by-nc-nd/4.0/
Full text restriction information: Access to this article is restricted until 24 months after publication by request of the publisher.
Restriction lift date: 2023-07-23
Citation: Duong, H. N., Goyal, A., Kallinterakis, V. and Veeraraghavan, M. (2021) 'Democracy and the pricing of initial public offerings around the world', Journal of Financial Economics. doi: 10.1016/j.jfineco.2021.07.010
Published Version: 10.1016/j.jfineco.2021.07.010

Abstract:

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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© 2021, Elsevier B.V. All rights reserved. This manuscript version is made available under the CC BY-NC-ND 4.0 license. Except where otherwise noted, this item's license is described as © 2021, Elsevier B.V. All rights reserved. This manuscript version is made available under the CC BY-NC-ND 4.0 license.
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