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Financial market development, market transparency, and IPO performance

Author

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  • Huang, Ying Sophie
  • Li, Mengyu
  • Chen, Carl R.

Abstract

In a pseudo-multinational setting, we test IPO performance for firms in locations with differential financial market development under one regulatory umbrella, mitigating the difficulties arising from observable or unobservable between-country heterogeneity. We find evidence that firms located in better-developed financial markets experience less underpricing and better long-run performance due to higher market transparency and less information asymmetry. Furthermore, we find greater benefits of financial market development on IPO initial pricing for financially constrained firms. Regulatory reforms reduce underpricing and enhance the impact of financial market development on underpricing. Our results hold particularly well for non–state-owned private firms.

Suggested Citation

  • Huang, Ying Sophie & Li, Mengyu & Chen, Carl R., 2019. "Financial market development, market transparency, and IPO performance," Pacific-Basin Finance Journal, Elsevier, vol. 55(C), pages 63-81.
    • Handle: RePEc:eee:pacfin:v:55:y:2019:i:c:p:63-81
    DOI: 10.1016/j.pacfin.2019.03.007
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    Citations

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    Cited by:

    1. Wang, Feng & Chai, Wei & Yan, Bin & Shan, Jing & Fan, Wenna, 2022. "Effect of geographical distance between underwriters and listed companies on IPO underpricing: Evidence from China's A-share market," International Review of Economics & Finance, Elsevier, vol. 79(C), pages 340-352.
    2. Nguyen Van Tan & Ninh Thi Trang, 2023. "The long-run performance of initial public offerings: evidence from a transition economy," Afro-Asian Journal of Finance and Accounting, Inderscience Enterprises Ltd, vol. 13(5), pages 574-591.
    3. Si, Deng-Kui & Li, Xiao-Lin & Huang, Shoujun, 2021. "Financial deregulation and operational risks of energy enterprise: The shock of liberalization of bank lending rate in China," Energy Economics, Elsevier, vol. 93(C).
    4. Mingsheng Li & Desheng Liu & Jing Zhang & Luxiu Zhang, 2021. "Volatile market condition, institutional constraints, and IPO anomaly: evidence from the Chinese market," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(1), pages 1239-1275, March.
    5. Sepehrdoust, Hamid & Ahmadvand, Shokoufeh & Mirzaei, Nesa, 2022. "Impact of information, communication technology and housing industry on financial market development," Technology in Society, Elsevier, vol. 69(C).

    More about this item

    Keywords

    Initial public offerings (IPOs); Financial market development; Market transparency;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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