Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/24147
Title: Institutional environment, firm ownership, and IPO first-day returns : evidence from China
Authors: Chen, Y
Wang, SS
Li, W
Sun, Q
Tong, WHS 
Keywords: Firm ownership
Institutional environment
IPO underpricing
Market sentiment
Share issue privatization
Issue Date: 2015
Publisher: Elsevier
Source: Journal of corporate finance, 2015 How to cite?
Journal: Journal of Corporate Finance 
Abstract: We examine two inconclusive issues in the IPO (initial public offering) underpricing literature. It is unclear whether private firms or state-owned enterprises (SOEs) underprice their IPOs more and how the institutional environment affects IPO underpricing. Using a much larger China IPO sample of SOEs, we conclude that SOEs underprice their IPOs more than private firms. Specifically, SOEs controlled by the central government (CSOEs) underprice their IPOs 27 percentage points more than private firms, whereas SOEs controlled by local governments (LSOEs) underprice theirs 7 percentage points more than those of private firms. Using the National Economic Research Institute Index of Marketization (NERIIM) to measure the institutional environment, we find that one index score improvement in institutional environment is associated with a two percentage-point reduction in IPO underpricing. Importantly, a better institutional environment reduces IPO underpricing most effectively for private firms, followed by LSOEs, and the least for CSOEs.
URI: http://hdl.handle.net/10397/24147
ISSN: 0929-1199
DOI: 10.1016/j.jcorpfin.2015.03.002
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