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Local IPOs, Local Delistings, and the Firm Location Premium

44 Pages Posted: 30 Jun 2012 Last revised: 8 Nov 2016

Giulia Baschieri

University of Bologna - Department of Management

Andrea Carosi

University of Sassari - Department of Economics and Business

Stefano Mengoli

University of Bologna - Department of Management

Date Written: January 15, 2012

Abstract

Borrowing a measure from ecology, we introduce a spatial dispersion index to quantify the firm traits related to firm geographic location and investigate firm exposure to local home bias and local investor risk tolerance as determinants of corporate market value. Consistent with the investor preference for local stocks, we find listed firms benefit from a location premium that increases with firm isolation and local investor wealth. IPOs and delistings are found to affect the market value of neighboring listed firms: isolated firms decrease in value when they cluster due to local IPOs while clustered firms increase in value as they become more isolated due to local delistings. Local firm clustering and risk tolerance also affect IPO underpricing. Empirical findings depict a framework where IPOs and delistings are locally jointly determined.

Keywords: Location premium; Local home bias; IPO; Delisting; Underpricing

JEL Classification: G11; G12

Suggested Citation

Baschieri, Giulia and Carosi, Andrea and Mengoli, Stefano, Local IPOs, Local Delistings, and the Firm Location Premium (January 15, 2012). Journal of Banking and Finance, Vol. 53, April 2015, pp. 67-83. Available at SSRN: https://ssrn.com/abstract=2096214 or http://dx.doi.org/10.2139/ssrn.2096214

Giulia Baschieri

University of Bologna - Department of Management ( email )

Via Capo di Lucca 34
Bologna, Bologna 40126
Italy

Andrea Carosi (Contact Author)

University of Sassari - Department of Economics and Business ( email )

Via Muroni, 25
Sassari, Sassari 07100
Italy
+39 079 213036 (Phone)

Stefano Mengoli

University of Bologna - Department of Management ( email )

Via Capo di Lucca, 24
http://stefanomengoli.weebly.com/
Bologna, Bologna 40132
Italy

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