The Impact of Institutional Quality on Initial Public Offerings

52 Pages Posted: 23 Apr 2010 Last revised: 23 Sep 2014

Don M. Autore

Florida State University - College of Business

Thomas Jason Boulton

Miami University

Scott Smart

Indiana University - Kelley School of Business - Department of Finance

Chad J. Zutter

University of Pittsburgh - Finance Group

Date Written: January 1, 2014

Abstract

Country-level institutional quality is positively correlated with the underpricing of initial public offerings (IPOs). The association is strong for IPOs issued in developed markets, but nearly absent for emerging market IPOs. We hypothesize that extra-legal institutions, including financial reporting practices, law enforcement, public trust, and outside monitoring affect the availability and value of private benefits of control accessible to entrepreneurs, which in turn shapes the relation between institutional quality and IPO underpricing. Our evidence supports prior studies that suggest that underpricing is motivated, at least in part, by entrepreneurs’ desire for post-IPO control.

Keywords: International finance, Initial public offerings, Governance, Investor protection

JEL Classification: G15, G24, G30, G32, G34

Suggested Citation

Autore, Don M. and Boulton, Thomas Jason and Smart, Scott and Zutter, Chad J., The Impact of Institutional Quality on Initial Public Offerings (January 1, 2014). Journal of Economics and Business, Vol. 73, No. 1, 2014. Available at SSRN: https://ssrn.com/abstract=1594288 or http://dx.doi.org/10.2139/ssrn.1594288

Don M. Autore

Florida State University - College of Business ( email )

821 ACADEMIC WAY, Room 314 RBA
P.O. Box 3061110
Tallahassee, FL 32306-1110
United States
850-644-7857 (Phone)

Thomas Jason Boulton (Contact Author)

Miami University ( email )

3028 Farmer School of Business
Oxford, OH 45056
United States
(513) 529-1563 (Phone)
(513) 529-8598 (Fax)

Scott B. Smart

Indiana University - Kelley School of Business - Department of Finance ( email )

1309 E. 10th St.
Kelley School of Business
Bloomington, IN 47405
United States
812-855-3401 (Phone)
812-855-5875 (Fax)

Chad J. Zutter

University of Pittsburgh - Finance Group ( email )

352 Mervis Hall, Katz GSOB
University of Pittsburgh
Pittsburgh, PA 15260
United States
412-648-2159 (Phone)
412-648-1693 (Fax)

HOME PAGE: http://www.pitt.edu/~czutter/

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