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Global Board Reforms and the Pricing of IPOs

Published online by Cambridge University Press:  08 April 2021

Yangyang Chen ,
Abhinav Goyal  and
Leon Zolotoy Open the ORCID record for Leon Zolotoy [Opens in a new window]
Yangyang Chen
Affiliation:
City University of Hong Kong, Department of Accountancy [email protected]
Abhinav Goyal
Affiliation:
Cork Business School, University College Cork [email protected]
Leon Zolotoy*
Affiliation:
Melbourne Business School, University of Melbourne
*
[email protected] (corresponding author)
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Abstract

We document that global board reforms are associated with a significant reduction in the underpricing of initial public offerings (IPOs). The effect is amplified for IPOs with greater agency problems and mitigated for IPOs certified by reputable intermediaries, IPOs with greater disclosure specificity, and IPOs in countries with better shareholder protection and stringent financial reporting regulations. Furthermore, global board reforms have led to an improvement in the long-term market performance, proceeds, and subscription level of IPOs and have enhanced board independence in the issuing firms. Our findings suggest that global board reforms have strengthened board oversight in the issuing firms, leading to less underpriced IPOs.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 57 , Issue 6 , September 2022 , pp. 2412 - 2443
Copyright
© The Author(s), 2021. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

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Footnotes

We thank Paul Malatesta (the editor) and John McConnell (the referee) for helpful comments.

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