ipo underpricing and international corporate governance.pdfVIP

Journal of International Business Studies (2010) 41, 206–222 2010 Academy of International Business All rights reserved 0047-2506 IPO underpricing and international corporate governance 1 Thomas J Boulton , Abstract Scott B Smart2 and It is well established that a link exists between a country’s legal system and the Chad J Zutter3 size, liquidity, and value of its capital markets. We study how differences in country-level governance affect the underpricing of initial public offerings 1 (IPOs). Examining 4462 IPOs across 29 countries from 2000 to 2004, we find Farmer School of Business, Miami University, the surprising result that underpricing is higher in countries with corporate Oxford, USA; 2Kelley School of Business, Indiana Y 3 governance that strengthens the position of investors relative to insiders. We University, Bloomington, USA; Katz Graduate School of Business, University of Pittsburgh, conjecture that when countries give outsiders more influence, IPO issuers P Pittsburgh, USA underprice more to generate excess demand for the offer, which in turn leads to greater ownership dispersion and reduces outsiders’ incentives to monitor O Correspondence: the behavior of corporate insiders. In other w