Local Corporate Misconduct and Local Initial Public Offerings

24 Pages Posted: 20 May 2020

See all articles by Emre Kuvvet

Emre Kuvvet

Nova Southeastern University

Darshana Palkar

Nova Southeastern University - H. Wayne Huizenga School of Business & Entrepreneurship

Date Written: February 2020

Abstract

This paper investigates the cost of going public through initial public offerings (IPOs) for firms located in regions with significant fraud density. We find that companies in regions with a high proportion of nearby firms that have committed corporate misconduct have more pronounced underpricing, experience higher post‐IPO stock return volatility, and are more likely to withdraw their offerings. Overall, our results show that local corporate misconduct is associated with the pricing of IPOs, and the breach of trust is related to costly IPOs for newcomers.

Keywords: contagion, local fraud density, local initial public offerings, trust, underpricing

JEL Classification: G11, G32, G41, K22

Suggested Citation

Kuvvet, Emre and Palkar, Darshana, Local Corporate Misconduct and Local Initial Public Offerings (February 2020). Financial Review, Vol. 55, Issue 1, pp. 169-192, 2020, Available at SSRN: https://ssrn.com/abstract=3601150 or http://dx.doi.org/10.1111/fire.12199

Emre Kuvvet (Contact Author)

Nova Southeastern University ( email )

Ft. Lauderdale, FL 33314
United States

Darshana Palkar

Nova Southeastern University - H. Wayne Huizenga School of Business & Entrepreneurship ( email )

3301 College Avenue
Ft. Lauderdale, FL 33314
United States

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