Market Manipulation Rules and IPO Underpricing

54 Pages Posted: 11 Sep 2020 Last revised: 20 Dec 2020

See all articles by Huu Nhan Duong

Huu Nhan Duong

Monash University - Department of Banking and Finance; Financial Research Network (FIRN)

Abhinav Goyal

University College Cork

Vasileios Kallinterakis

University of Liverpool - Management School (ULMS)

Madhu Veeraraghavan

T.A. PAI Management Institute, Finance Area; T A Pai Management Institute, Manipal

Date Written: August 2, 2020

Abstract

Using a large sample of 13,459 initial public offerings (IPOs) from 37 countries, we find that trading rules on market manipulation reduce IPO underpricing. The effect is weaker for IPOs certified by reputable intermediaries, in countries with greater shareholder rights protection, better financial reporting quality, and after the adoption of International Financial Reporting Standards. Better trading rules on market manipulation are also related to higher IPO proceeds, subscription-level, and trading volume, lower IPO listing fees, and better long-term post-IPO performance. Our findings are consistent with the notion that exchange trading rules mitigate information asymmetry problems for investors, resulting in lower IPO underpricing.

Keywords: Exchange trading rules; market manipulation; IPO pricing; information asymmetry

JEL Classification: G10, G14, G15, G30

Suggested Citation

Duong, Huu Nhan and Goyal, Abhinav and Kallinterakis, Vasileios and Veeraraghavan, Madhu, Market Manipulation Rules and IPO Underpricing (August 2, 2020). Journal of Corporate Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3665602 or http://dx.doi.org/10.2139/ssrn.3665602

Huu Nhan Duong

Monash University - Department of Banking and Finance ( email )

Melbourne
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Abhinav Goyal (Contact Author)

University College Cork ( email )

O'Rahilly Building
College Road
Cork
Ireland
+353 (0)21 490 2839 (Phone)

Vasileios Kallinterakis

University of Liverpool - Management School (ULMS) ( email )

Chatham Street
Liverpool, L69 7ZH
United Kingdom

Madhu Veeraraghavan

T.A. PAI Management Institute, Finance Area ( email )

Bangalore
Manipal, Karnataka 576104
India
+91-820-2701030 (Phone)

T A Pai Management Institute, Manipal ( email )

TAPMI Canpus
Manipal
Manipal, Manipal 576104
India
+91-820-2701020 (Phone)

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