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The effect of gambling culture on initial public offering underpricing

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  • Xu, Wen
  • Zhang, Linlang
  • Chan, Kam C.

Abstract

We examine the effect of gambling culture where an IPO firm is located on its IPO underpricing. Our findings suggest that an IPO firm in a strong gambling culture region, on average, operates more aggressively than one in a weak gambling culture region. Then, we show that such IPOs exhibit lower underpricing than their counterparts. The findings remain qualitatively the same after an array of robustness checks. We interpret the results as indicating that IPO investors consider aggressively operated IPO firms to have good upside potential and are willing to pay higher subscription prices for these IPOs.

Suggested Citation

  • Xu, Wen & Zhang, Linlang & Chan, Kam C., 2024. "The effect of gambling culture on initial public offering underpricing," Finance Research Letters, Elsevier, vol. 67(PB).
    • Handle: RePEc:eee:finlet:v:67:y:2024:i:pb:s1544612324009425
    DOI: 10.1016/j.frl.2024.105912
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    References listed on IDEAS

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    1. Jay R. Ritter & Ivo Welch, 2002. "A Review of IPO Activity, Pricing, and Allocations," Journal of Finance, American Finance Association, vol. 57(4), pages 1795-1828, August.
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    4. Huang, Yong & Yan, Chao & Chan, Kam C., 2021. "Does aggressiveness help? Evidence from IPO corruption and pricing in China," Journal of Corporate Finance, Elsevier, vol. 67(C).
    5. Zhao, Binjie & Tan, Jianhua & Chan, Kam C., 2022. "Does a CEO's prior academic experience helpful to an IPO firm? The case of IPO discount," Finance Research Letters, Elsevier, vol. 47(PB).
    6. Huang, Fumian & Ge, Liming & Wu, Sirui, 2023. "Minority shareholder protection, corporate governance, and investment efficiency," Finance Research Letters, Elsevier, vol. 58(PC).
    7. Gao, Shenghao & Liu, Jinzhao & Chan, Kam C., 2017. "Does the removal of the IPO lockup matter in IPO pricing?," Finance Research Letters, Elsevier, vol. 23(C), pages 246-252.
    8. Peng, Xuan & Jia, Yibo & Chan, Kam C. & Wang, Xiongyuan, 2021. "Let us work together: The impact of customer strategic alliances on IPO underpricing and post-IPO performance," Journal of Corporate Finance, Elsevier, vol. 67(C).
    9. Yan Xie & Xin Wang & Kam C. Chan, 2023. "Does local gambling culture affect bond yield spread? Evidence from China," Applied Economics Letters, Taylor & Francis Journals, vol. 30(8), pages 1101-1106, May.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Initial public offerings; Gambling culture; Aggressiveness;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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