Global Board Reforms and the Pricing of IPOs

Yangyang Chen · Abhinav Goyal · Leon Zolotoy

47 citations0/0 files storedJournal of Financial and Quantitative Analysis

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Corporate Finance and Governance Financial Markets and Investment Strategies Auditing, Earnings Management, Governance

Abstract

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.

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References

1976Theory of the firm: Managerial behavior, agency costs and ownership structure 1983Separation of Ownership and Control 1998Law and Finance 1986Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers 1993The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems 2003Earnings management and investor protection: an international comparison 2002Audit committee, board of director characteristics, and earnings management 1995The New Issues Puzzle

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2023Corporate governance reforms, societal trust, and corporate financial policies 2022Societal secrecy and IPO underpricing 2020Board Governance and Investment Sensitivity to Stock Price: International Evidence 2023Global IPO underpricing during the Covid-19 pandemic: The impact of firm fundamentals, financial intermediaries, and global factors 2023IPOs and SPACs: Recent Developments

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