TY - JOUR
T1 - Legal protection and underpricing of IPOs
T2 - Evidence from China
AU - Liu, Jianlei
AU - Uchida, Konari
AU - Gao, Ruidong
N1 - Funding Information:
An earlier version of this paper was presented at the Asian Finance Association Conference. We would like to thank Nobuaki Hori, Yusuke Kinari, Ghon Rhee (editor), and an anonymous reviewer for their valuable comments. This research has been financially supported by JSPS KAKENHI Grant Number 23330107 .
PY - 2014/4
Y1 - 2014/4
N2 - Chinese data enable investigation of the relationship between underpricing of initial public offerings (IPOs) and legal protection with controlling for time-invariant characteristics of regions. Our investigation of Chinese IPOs between 1997 and 2009 shows that firms from a province with more developed legal framework experience less underpricing after controlling for time-invariant, province-fixed effects. We also find that the extent of underpricing is decreased by the strength of legal protection of property rights. Importantly, these tendencies are evident only after the introduction of a book-building system, which provides issuers and underwriters with discretion on offering price determination. These results offer robust evidence that legal protection mitigates ex ante uncertainty regarding property rights protection, and thereby, reduces underpricing.
AB - Chinese data enable investigation of the relationship between underpricing of initial public offerings (IPOs) and legal protection with controlling for time-invariant characteristics of regions. Our investigation of Chinese IPOs between 1997 and 2009 shows that firms from a province with more developed legal framework experience less underpricing after controlling for time-invariant, province-fixed effects. We also find that the extent of underpricing is decreased by the strength of legal protection of property rights. Importantly, these tendencies are evident only after the introduction of a book-building system, which provides issuers and underwriters with discretion on offering price determination. These results offer robust evidence that legal protection mitigates ex ante uncertainty regarding property rights protection, and thereby, reduces underpricing.
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U2 - 10.1016/j.pacfin.2014.02.006
DO - 10.1016/j.pacfin.2014.02.006
M3 - Article
AN - SCOPUS:84896379925
SN - 0927-538X
VL - 27
SP - 163
EP - 187
JO - Pacific Basin Finance Journal
JF - Pacific Basin Finance Journal
IS - 1
ER -