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Market manipulation rules and IPO underpricing
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Accepted version
Date
2020-12-31
Authors
Duong, Huu Nhan
Goyal, Abhinav
Kallinterakis, Vasileios
Veeraraghavan, Madhucora
Journal Title
Journal ISSN
Volume Title
Publisher
Elsevier
Published Version
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.
Description
Keywords
Exchange trading rules , Information asymmetry , IPO pricing , Market manipulation
Citation
Duong, H. N., Goyal, A., Kallinterakis, V. and Veeraraghavan, M. (2021) 'Market manipulation rules and IPO underpricing', Journal of Corporate Finance, 67, 101846 (20 pp). doi: 10.1016/j.jcorpfin.2020.101846