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Loan market benefits of (High) IPO underpricing

Author

Listed:
  • Su, Xunhua
  • Zhang, Donghang
  • Zhang, Xiaoyu

Abstract

We provide novel evidence on the loan market benefits of high IPO underpricing. We show that greater underpricing is associated with a significantly larger within-firm reduction of post-IPO borrowing costs. This benefit of underpricing is less pronounced for firms with high ex-ante information asymmetry and is concentrated in firms with a high demand for advertisements. In addition, neither price revision before the IPO nor the short-term or long-term stock return after the IPO has a similar effect. Our results suggest that underpricing affects borrowing costs through an attention channel and highlight a real economic effect of underpricing from the loan market.

Suggested Citation

  • Su, Xunhua & Zhang, Donghang & Zhang, Xiaoyu, 2025. "Loan market benefits of (High) IPO underpricing," Journal of Financial Intermediation, Elsevier, vol. 61(C).
    • Handle: RePEc:eee:jfinin:v:61:y:2025:i:c:s1042957324000603
    DOI: 10.1016/j.jfi.2024.101132
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    Keywords

    IPO; Underpricing; Syndicated loans; Loan spreads; Borrowing costs;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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