Earnings Quality and International IPO Underpricing
41 Pages Posted: 20 Mar 2007 Last revised: 14 May 2014
Date Written: August 28, 2008
This study examines the impact of country-level earnings quality on IPO underpricing. Examining 10,783 IPOs from 37 countries, we find that IPOs are underpriced less in countries where public firms produce higher quality earnings information. This finding persists after controlling for other deal- and country-specific factors that affect IPO underpricing, and it is driven neither by the large and relatively transparent markets in the U.S. and U.K. nor by the relatively opaque Japanese market. The impact of low earnings quality on underpricing is partially offset by the use of a top-tier underwriter.
Keywords: International finance, Earnings quality, Initial public offerings, Underpricing, Valuation
JEL Classification: G15, G24, G30, G32, G34
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