Local Policy Risk and IPO Performance

Litigation Risk and IPO Underpricing Revisited (Grace)

This paper explains why the evidence on the relation between litigation risk and initial public offering (IPO) underpricing is mixed. Two reasons are behind the nonstationary relation. First, the increasing usage of Directors and Officers’ liability insurance arguably reduces the need to use underpricing to insure against litigation liability to a limited extent. Second, class action lawsuits o...

Overcoming the Liability of Foreignness: Pre-IPO Investors from the Host Country and Foreign IPO Performance

Foreign IPO firms incur higher issuance costs than domestic firms due to greater information asymmetry and ex ante valuation uncertainty. Little is known about how to overcome such liability of foreignness. This study, based on foreign-listed Chinese firms, shows that pre-IPO financing relationship with investors from the country of listing can effectively mitigate cross-border information fric...

Prospect theory and the long-run performance of IPO stocks

We offer a new explanation for the long-run underperformance of IPO stocks using prospect theory. According to this theory, uncertain outcomes enter an investor’s utility function through a nonlinear transformation of their probabilities. Small probability events are given more weight than in expected utility theory, whereas median and large probability events are given less weight. IPO stocks ...

Global Knowledge, Local Solutions: Interest Rate and Monetary Policy

Earnings Management and Delisting Risk: The Case of IPO Firms