Skip to main content
Top

Hint

Swipe to navigate through the articles of this issue

19-09-2022 | Regular Article

Does the appointment of the three musketeers reduce IPO underpricing? global evidence

Authors: Fouad Jamaani, Manal Alidarous

Published in: Eurasian Business Review

Login to get access
share
SHARE

Abstract

This paper examines impact of hiring reputable auditors, underwriters, and lawyers, “namely, the three musketeers”, by issuing firms on the global IPO underpricing. We employ large and unique dataset of 24,312 IPOs in 22 countries between 1995 and 2019. We find that issuers benefit from hiring the three musketeers to certify issuers’ quality to reduce investors’ ex-ante uncertainty to guard their offerings from underpricing. Results show significant differences of the impact of the three musketeers on underpricing in countries with different market sophistication, auditing and reporting standards, and rule of law. Our results reveal that issuers may want to be careful when hiring quality auditors, underwriters, and lawyers when going public since not all those reputable intermediaries are equally important in alleviating underpricing. Our research has implications for IPO owners, investors, researchers, and regulators.
Footnotes
1
We perceive the involvement of the reputable auditors, underwriters, and lawyers as background guarding agents. They are “the three musketeers” who work to protect the wealth of IPO issuing firms from possible excessive underpricing by IPO investors.
 
2
There is another strand of research which argues that auditing firms’ reports do not truly contain conclusive information about their prospects, so essentially, audit reports are mere testimony (Hughes, 1986; Datar et al., 1991; Spathis, 2002; Francis, 2004; Chung et al., 2019). The authors believe that auditing firms regardless of their reputation tend to grant a ‘good opinion’ to all public-going firms because of ongoing negotiations between IPO owners and auditing companies.
 
3
There are existing research documents which are evidence of a positive and no correlation between reputable underwriting banks and the level of IPO underpricing (Beatty & Welch, 1996; Loughran & Ritter, 2004; Boulton et al. 2017).
 
4
Jamaani and Ahmed (2021) describe developing (developed) countries as having weak (strong) market sophistication.
 
5
For further discussion about what is known as spinning practice, see the distinguished work of Liu & Ritter (2010).
 
6
The G20 economies were chosen because they provide a varied and diversified dataset for rigorous testing of research hypotheses. The G20 is a yearly summit for 20 major developed and emerging economies to improve international collaboration and coordination (The G20 China 2016). The G20 comprises some of the European Union countries including, the United Kingdom, Italy, France, Poland, Germany, Denmark, Bulgaria, Greece, Slovenia, Spain, Romania, and Sweden. It also includes Argentina, India, South Korea, Australia, the United States, Mexico, South Africa, Brazil, Russia, Turkey, Canada, Indonesia, Japan, China, Saudi Arabia. Bulgaria, Slovenia, Spain, Romania, and Argentina are excluded due to lack of IPO data. The G20 countries’ size and scale in the international economy attracts research and practice (Johannesen & Zucman, 2014; Jamaani and Ahmed 2022). In 2014, the G20 countries contributed over 80% of global GDP, while its stock markets accounted for almost 80% of world market value (The World Bank Group 2015). Almost 76% of worldwide listed businesses were traded on G20 stock exchanges and nearly 25,000 IPOs were launched on G20 stock exchanges, representing 79% of all worldwide IPOs between 1995 and 2014 (The World Bank Group 2015). The final dataset includes a selection of 22 countries.
 
7
We follow Banerjee et al., (2011) to replace the first week closing price when data for the first day closing price is missing.
 
8
We would like to express our appreciation to the anonymous reviewers for encouraging us to examine the consistency of findings obtained after removing insignificant variables from Table 3.
 
9
We would like to express our gratitude to the anonymous reviewers for encouraging us to investigate adding three extra indicator variables to account for the combination of two of the three musketeers’ variables.
 
10
We appreciate the anonymous referees for suggesting us to investigate dividing the sample into sub-samples to check whether the overall findings remained valid.
 
Literature
go back to reference Agathee, U. S., Sannassee, R. V., & Brooks, C. (2012). ‘The underpricing of IPOs on the stock exchange of Mauritius’. Research in International Business and Finance, 26(2), 281–303 CrossRef Agathee, U. S., Sannassee, R. V., & Brooks, C. (2012). ‘The underpricing of IPOs on the stock exchange of Mauritius’. Research in International Business and Finance, 26(2), 281–303 CrossRef
go back to reference Aggarwal, R. (2000). ‘Stabilization activities by underwriters after initial public offerings’. The Journal of Finance, 55(3), 1075–1103 CrossRef Aggarwal, R. (2000). ‘Stabilization activities by underwriters after initial public offerings’. The Journal of Finance, 55(3), 1075–1103 CrossRef
go back to reference Aggarwal, R., & Goodell, J. W. (2009). ‘Markets and institutions in financial intermediation: National characteristics as determinants’. Journal of Banking & Finance, 33(10), 1770–1780 CrossRef Aggarwal, R., & Goodell, J. W. (2009). ‘Markets and institutions in financial intermediation: National characteristics as determinants’. Journal of Banking & Finance, 33(10), 1770–1780 CrossRef
go back to reference Alidarous, M., & Jamaani, F. (2021). ‘The concurrent effects of IFRS mandate and formal institutional quality on the aftermarket performance of IPO firms in emerging countries’. International Journal of Financial Research, 12(3), 320–344 CrossRef Alidarous, M., & Jamaani, F. (2021). ‘The concurrent effects of IFRS mandate and formal institutional quality on the aftermarket performance of IPO firms in emerging countries’. International Journal of Financial Research, 12(3), 320–344 CrossRef
go back to reference Asthana, S., Khurana, I., & Raman, K. (2019). ‘Fee competition among Big 4 auditors and audit quality’. Review of quantitative finance and accounting, 52(2), 403–438 CrossRef Asthana, S., Khurana, I., & Raman, K. (2019). ‘Fee competition among Big 4 auditors and audit quality’. Review of quantitative finance and accounting, 52(2), 403–438 CrossRef
go back to reference Autore, D., Smart, S. B., Boulton, T. J., & Zutter, C. J. (2014). ‘The impact of institutional quality on initial public offerings’. Journal of Economics and Business, 73(1), 65–96 CrossRef Autore, D., Smart, S. B., Boulton, T. J., & Zutter, C. J. (2014). ‘The impact of institutional quality on initial public offerings’. Journal of Economics and Business, 73(1), 65–96 CrossRef
go back to reference Azevedo, A., Guney, Y., & & Leng, J. (2018). ‘Initial public offerings in China: Underpricing, statistics and developing literature’. Research in International Business and Finance, 46, 387–398 CrossRef Azevedo, A., Guney, Y., & & Leng, J. (2018). ‘Initial public offerings in China: Underpricing, statistics and developing literature’. Research in International Business and Finance, 46, 387–398 CrossRef
go back to reference Banerjee, S., Dai, L., & Shrestha, K. (2011). ‘Cross-country IPOs: what explains differences in underpricing?‘. Journal of Corporate Finance, 17(5), 1289–1305 CrossRef Banerjee, S., Dai, L., & Shrestha, K. (2011). ‘Cross-country IPOs: what explains differences in underpricing?‘. Journal of Corporate Finance, 17(5), 1289–1305 CrossRef
go back to reference Barondes, R., Nyce, C., & Sanger, G. (2007). ‘Underwriters’ counsel as gatekeeper or turnstile: An empirical analysis of law firm prestige and performance in IPOs’. Capital Markets Law Journal, 2(2), 164–190 CrossRef Barondes, R., Nyce, C., & Sanger, G. (2007). ‘Underwriters’ counsel as gatekeeper or turnstile: An empirical analysis of law firm prestige and performance in IPOs’. Capital Markets Law Journal, 2(2), 164–190 CrossRef
go back to reference Bates, T. W., Neyland, J. B., & Lv, J. (2018). Do lawyers matter in initial public offerings?, working paper Bates, T. W., Neyland, J. B., & Lv, J. (2018). Do lawyers matter in initial public offerings?, working paper
go back to reference Beatty, R. P. (1989). ‘Auditor reputation and the pricing of initial public offerings’. Accounting Review, 64(4), 693–709 Beatty, R. P. (1989). ‘Auditor reputation and the pricing of initial public offerings’. Accounting Review, 64(4), 693–709
go back to reference Beatty, R. P., & Ritter, J. R. (1986). ‘Investment banking, reputation, and the underpricing of initial public offerings’. Journal of Financial Economics, 15, 1–2 CrossRef Beatty, R. P., & Ritter, J. R. (1986). ‘Investment banking, reputation, and the underpricing of initial public offerings’. Journal of Financial Economics, 15, 1–2 CrossRef
go back to reference Beatty, R. P., & Welch, I. (1996). ‘Issuer expenses and legal liability in initial public offerings’. The Journal of Law and Economics, 39(2), 545–602 CrossRef Beatty, R. P., & Welch, I. (1996). ‘Issuer expenses and legal liability in initial public offerings’. The Journal of Law and Economics, 39(2), 545–602 CrossRef
go back to reference Benveniste, L. M., & Spindt, P. A. (1989). ‘How investment bankers determine the offer price and allocation of new issues’. Journal of Financial Economics, 24(2), 343–361 CrossRef Benveniste, L. M., & Spindt, P. A. (1989). ‘How investment bankers determine the offer price and allocation of new issues’. Journal of Financial Economics, 24(2), 343–361 CrossRef
go back to reference Boeh, K. K., & Southam, C. (2011). ‘Impact of initial public offering coalition on deal completion’, Venture Capital, vol. 13, no. 4, pp. 313 – 36 Boeh, K. K., & Southam, C. (2011). ‘Impact of initial public offering coalition on deal completion’, Venture Capital, vol. 13, no. 4, pp. 313 – 36
go back to reference Bonaventura, M., & Giudici, G. (2017). ‘IPO valuation and profitability expectations: evidence from the Italian exchange’. Eurasian Business Review, 7(2), 247–266 CrossRef Bonaventura, M., & Giudici, G. (2017). ‘IPO valuation and profitability expectations: evidence from the Italian exchange’. Eurasian Business Review, 7(2), 247–266 CrossRef
go back to reference Boolaky, P., Krishnamurti, C., & Hoque, A Determinants of the strength of auditing and reporting standards: A cross-country study’, Australasian Accounting Business and Finance Journalvol. 7, no. 4, pp.17–36 Boolaky, P., Krishnamurti, C., & Hoque, A Determinants of the strength of auditing and reporting standards: A cross-country study’, Australasian Accounting Business and Finance Journalvol. 7, no. 4, pp.17–36
go back to reference Booth, J. R., & Smith, R. L. (1986). ‘Capital raising, underwriting and the certification hypothesis’. Journal of Financial Economics, 15(1), 261–281 CrossRef Booth, J. R., & Smith, R. L. (1986). ‘Capital raising, underwriting and the certification hypothesis’. Journal of Financial Economics, 15(1), 261–281 CrossRef
go back to reference Boulton, T. J., Smart, S. B., & Zutter, C. J. (2010). ‘IPO underpricing and international corporate governance’. Journal of International Business Studies, 41(2), 206–222 CrossRef Boulton, T. J., Smart, S. B., & Zutter, C. J. (2010). ‘IPO underpricing and international corporate governance’. Journal of International Business Studies, 41(2), 206–222 CrossRef
go back to reference Boulton, T. J., Smart, S. B., & Zutter, C. J. (2011). ‘Earnings quality and international IPO underpricing’. The Accounting Review, 86(2), 483–505 CrossRef Boulton, T. J., Smart, S. B., & Zutter, C. J. (2011). ‘Earnings quality and international IPO underpricing’. The Accounting Review, 86(2), 483–505 CrossRef
go back to reference Boulton, T. J., Smart, S. B., & Zutter, C. J. (2017). ‘Conservatism and international IPO underpricing’. Journal of International Business Studies, 48(6), 763–785 CrossRef Boulton, T. J., Smart, S. B., & Zutter, C. J. (2017). ‘Conservatism and international IPO underpricing’. Journal of International Business Studies, 48(6), 763–785 CrossRef
go back to reference Butler, A. W., Keefe, M. O. C., & Kieschnick, R. (2014). ‘Robust determinants of IPO underpricing and their implications for IPO research’. Journal of Corporate Finance, 27, 367–383 CrossRef Butler, A. W., Keefe, M. O. C., & Kieschnick, R. (2014). ‘Robust determinants of IPO underpricing and their implications for IPO research’. Journal of Corporate Finance, 27, 367–383 CrossRef
go back to reference Cao, C. X., Chen, C., & Wang, J. Q. (2015). ‘Underwriter reputation and pricing of risk: evidence from seasoned equity offerings’. Review of Quantitative Finance and Accounting, 44(4), 609–643 CrossRef Cao, C. X., Chen, C., & Wang, J. Q. (2015). ‘Underwriter reputation and pricing of risk: evidence from seasoned equity offerings’. Review of Quantitative Finance and Accounting, 44(4), 609–643 CrossRef
go back to reference Carter, R. B., Dark, F. H., & Singh, A. K. (1998). ‘Underwriter reputation, initial returns, and the long-run performance of IPO stocks’. The Journal of Finance, 53(1), 285–311 CrossRef Carter, R. B., Dark, F. H., & Singh, A. K. (1998). ‘Underwriter reputation, initial returns, and the long-run performance of IPO stocks’. The Journal of Finance, 53(1), 285–311 CrossRef
go back to reference Carter, R., & Manaster, S. (1990). ‘Initial public offerings and underwriter reputation’. The Journal of Finance, 45(4), 1045–1067 CrossRef Carter, R., & Manaster, S. (1990). ‘Initial public offerings and underwriter reputation’. The Journal of Finance, 45(4), 1045–1067 CrossRef
go back to reference Chan, K. H., Mo, P. L. L., & Zhang, W. (2021). ‘Do abnormal IPO audit fees signal IPO audit quality and post-IPO performance? A principal-agent analysis based on evidence from China’. Journal of International Accounting Research, 20(1), 1–29 CrossRef Chan, K. H., Mo, P. L. L., & Zhang, W. (2021). ‘Do abnormal IPO audit fees signal IPO audit quality and post-IPO performance? A principal-agent analysis based on evidence from China’. Journal of International Accounting Research, 20(1), 1–29 CrossRef
go back to reference Chang, C., Chiang, Y. M., Qian, Y., & & Ritter, J. R. (2017). ‘Pre-market trading and IPO pricing’. The Review of Financial Studies, 30(3), 835–865 CrossRef Chang, C., Chiang, Y. M., Qian, Y., & & Ritter, J. R. (2017). ‘Pre-market trading and IPO pricing’. The Review of Financial Studies, 30(3), 835–865 CrossRef
go back to reference Chang, X., Gygax, A. F., Oon, E., & Zhang, H. F. (2008). ‘Audit quality, auditor compensation and initial public offering underpricing’. Accounting & Finance, 48(3), 391–416 CrossRef Chang, X., Gygax, A. F., Oon, E., & Zhang, H. F. (2008). ‘Audit quality, auditor compensation and initial public offering underpricing’. Accounting & Finance, 48(3), 391–416 CrossRef
go back to reference Chaserant, C., & Harnay, S. (2015). ‘Lawyers’ reputation and the quality of legal services: An economic analysis of self-regulation’. European Journal of Law and Economics, 39(2), 431–449 CrossRef Chaserant, C., & Harnay, S. (2015). ‘Lawyers’ reputation and the quality of legal services: An economic analysis of self-regulation’. European Journal of Law and Economics, 39(2), 431–449 CrossRef
go back to reference Cheong, C. S., & Zurbruegg, R. (2016). ‘Analyst forecasts and stock price informativeness: Some international evidence on the role of audit quality’. Journal of Contemporary Accounting & Economics, 12(3), 257–273 CrossRef Cheong, C. S., & Zurbruegg, R. (2016). ‘Analyst forecasts and stock price informativeness: Some international evidence on the role of audit quality’. Journal of Contemporary Accounting & Economics, 12(3), 257–273 CrossRef
go back to reference Chi, H. Y., & Weng, T. C. (2014). ‘Managerial legal liability and Big 4 auditor choice’. Journal of Business Research, 67(9), 1857–1869 CrossRef Chi, H. Y., & Weng, T. C. (2014). ‘Managerial legal liability and Big 4 auditor choice’. Journal of Business Research, 67(9), 1857–1869 CrossRef
go back to reference Chung, H., Sonu, C. H., Zang, Y., & Choi, J. H. (2019). ‘Opinion shopping to avoid a going concern audit opinion and subsequent audit quality’. Auditing: A Journal of Practice & Theory, 38(2), 101–123 CrossRef Chung, H., Sonu, C. H., Zang, Y., & Choi, J. H. (2019). ‘Opinion shopping to avoid a going concern audit opinion and subsequent audit quality’. Auditing: A Journal of Practice & Theory, 38(2), 101–123 CrossRef
go back to reference Crabb, K. C. (1983). ‘Providing legal services in foreign countries: Making room for the american attorney’. Colum L Rev, 83, 1767 CrossRef Crabb, K. C. (1983). ‘Providing legal services in foreign countries: Making room for the american attorney’. Colum L Rev, 83, 1767 CrossRef
go back to reference Datar, S. M., Feltham, G. A., & Hughes, J. S. (1991). ‘The role of audits and audit quality in valuing new issues’. Journal Of Accounting And Economics, 14(1), 3–49 CrossRef Datar, S. M., Feltham, G. A., & Hughes, J. S. (1991). ‘The role of audits and audit quality in valuing new issues’. Journal Of Accounting And Economics, 14(1), 3–49 CrossRef
go back to reference DeAngelo, L. E. (1981). ‘Auditor size and audit quality’. Journal of Accounting and Economics, 3(3), 183–199 CrossRef DeAngelo, L. E. (1981). ‘Auditor size and audit quality’. Journal of Accounting and Economics, 3(3), 183–199 CrossRef
go back to reference Demirguc-Kunt, A., Laeven, L., & Levine, R. (2004). ‘Regulations, market structure, institutions, and the cost of financial intermediation’. Journal of Money Credit and Banking, 36(3), 593–622 CrossRef Demirguc-Kunt, A., Laeven, L., & Levine, R. (2004). ‘Regulations, market structure, institutions, and the cost of financial intermediation’. Journal of Money Credit and Banking, 36(3), 593–622 CrossRef
go back to reference Dewenter, K. L., & Malatesta, P. H. (1997). ‘Public offerings of state-owned and privately‐owned enterprises: an international comparison’. The Journal of Finance, 52(4), 1659–1679 CrossRef Dewenter, K. L., & Malatesta, P. H. (1997). ‘Public offerings of state-owned and privately‐owned enterprises: an international comparison’. The Journal of Finance, 52(4), 1659–1679 CrossRef
go back to reference Du, X. (2019). ‘Does CEO-auditor dialect sharing impair pre-IPO audit quality? Evidence from China’. Journal of Business Ethics, 156(3), 699–735 CrossRef Du, X. (2019). ‘Does CEO-auditor dialect sharing impair pre-IPO audit quality? Evidence from China’. Journal of Business Ethics, 156(3), 699–735 CrossRef
go back to reference Dunbar, C. G. (2000). ‘Factors affecting investment bank initial public offering market share’. Journal of Financial Economics, 55(1), 3–41 CrossRef Dunbar, C. G. (2000). ‘Factors affecting investment bank initial public offering market share’. Journal of Financial Economics, 55(1), 3–41 CrossRef
go back to reference Emenalo, C. O., & Gagliardi, F. (2020). ‘Is current institutional quality linked to legal origins and disease endowments? Evidence from Africa’. Research in International Business and Finance, 52, 101065 CrossRef Emenalo, C. O., & Gagliardi, F. (2020). ‘Is current institutional quality linked to legal origins and disease endowments? Evidence from Africa’. Research in International Business and Finance, 52, 101065 CrossRef
go back to reference Fan, J. P., & Wong, T. J. (2005). ‘Do external auditors perform a corporate governance role in emerging markets? Evidence from East Asia’. Journal of Accounting Research, 43(1), 35–72 CrossRef Fan, J. P., & Wong, T. J. (2005). ‘Do external auditors perform a corporate governance role in emerging markets? Evidence from East Asia’. Journal of Accounting Research, 43(1), 35–72 CrossRef
go back to reference Fang, L. H. (2005). ‘Investment bank reputation and the price and quality of underwriting services’. The Journal of Finance, 60(6), 2729–2761 CrossRef Fang, L. H. (2005). ‘Investment bank reputation and the price and quality of underwriting services’. The Journal of Finance, 60(6), 2729–2761 CrossRef
go back to reference Fernando, C. S., Gatchev, V. A., May, A. D., & Megginson, W. L. (2015). ‘Prestige without purpose? Reputation, differentiation, and pricing in US equity underwriting’. Journal of Corporate Finance, 32, 41–63 CrossRef Fernando, C. S., Gatchev, V. A., May, A. D., & Megginson, W. L. (2015). ‘Prestige without purpose? Reputation, differentiation, and pricing in US equity underwriting’. Journal of Corporate Finance, 32, 41–63 CrossRef
go back to reference Francis, J. R. (2004). ‘What do we know about audit quality?‘. The British Accounting Review, 36(4), 345–368 CrossRef Francis, J. R. (2004). ‘What do we know about audit quality?‘. The British Accounting Review, 36(4), 345–368 CrossRef
go back to reference Francis, J. R., & Yu, M. D. (2009). ‘Big 4 office size and audit quality’. The Accounting Review, 84(5), 1521–1552 CrossRef Francis, J. R., & Yu, M. D. (2009). ‘Big 4 office size and audit quality’. The Accounting Review, 84(5), 1521–1552 CrossRef
go back to reference González, M., Guzmán, A., Tellez-Falla, D. F., & Trujillo, M. A. (2021). ‘Determinants of corporate tone in an initial public offering: Powerful CEOs versus well-functioning boards’. Research in International Business and Finance, 58, 101481 CrossRef González, M., Guzmán, A., Tellez-Falla, D. F., & Trujillo, M. A. (2021). ‘Determinants of corporate tone in an initial public offering: Powerful CEOs versus well-functioning boards’. Research in International Business and Finance, 58, 101481 CrossRef
go back to reference Habib, M. A., & Ljungqvist, A. P. (2001). ‘Underpricing and entrepreneurial wealth losses in IPOs: Theory and evidence’. The Review of Financial Studies, 14(2), 433–458 CrossRef Habib, M. A., & Ljungqvist, A. P. (2001). ‘Underpricing and entrepreneurial wealth losses in IPOs: Theory and evidence’. The Review of Financial Studies, 14(2), 433–458 CrossRef
go back to reference Hanafi, M. M. (2021). ‘Fixed Price and Book Building Methods in an Exogenous Environment: Evidence from Indonesia Stock Market’. Research in International Business and Finance, 58, 101430 CrossRef Hanafi, M. M. (2021). ‘Fixed Price and Book Building Methods in an Exogenous Environment: Evidence from Indonesia Stock Market’. Research in International Business and Finance, 58, 101430 CrossRef
go back to reference Hanley, K. W., & Hoberg, G. (2010). ‘The information content of IPO prospectuses’. The Review of Financial Studies, 23(7), 2821–2864 CrossRef Hanley, K. W., & Hoberg, G. (2010). ‘The information content of IPO prospectuses’. The Review of Financial Studies, 23(7), 2821–2864 CrossRef
go back to reference Hausfeld, M. D. (2009). ‘Global Enforcement of Anticompetitive Conduct’. Sedona Conf J, 10, 9 Hausfeld, M. D. (2009). ‘Global Enforcement of Anticompetitive Conduct’. Sedona Conf J, 10, 9
go back to reference Herman, L. (2020). ‘Neither takers nor makers: The Big-4 auditing firms as regulatory intermediaries’. Accounting History, 25(3), 349–374 CrossRef Herman, L. (2020). ‘Neither takers nor makers: The Big-4 auditing firms as regulatory intermediaries’. Accounting History, 25(3), 349–374 CrossRef
go back to reference Hong, H. A., Hung, M., & Lobo, G. J. (2014). ‘The Impact of Mandatory IFRS Adoption on IPOs in Global Capital Markets’. The Accounting Review, 89(4), 1365–1397 CrossRef Hong, H. A., Hung, M., & Lobo, G. J. (2014). ‘The Impact of Mandatory IFRS Adoption on IPOs in Global Capital Markets’. The Accounting Review, 89(4), 1365–1397 CrossRef
go back to reference Hope, O. K. (2003). ‘Firm-level disclosures and the relative roles of culture and legal origin’. Journal of International Financial Management & Accounting, 14(3), 218–248 CrossRef Hope, O. K. (2003). ‘Firm-level disclosures and the relative roles of culture and legal origin’. Journal of International Financial Management & Accounting, 14(3), 218–248 CrossRef
go back to reference Hopp, C., & Dreher, A. (2013). ‘Do differences in institutional and legal environments explain cross-country variations in IPO underpricing?‘. Applied Economics, 45(4), 435–454 CrossRef Hopp, C., & Dreher, A. (2013). ‘Do differences in institutional and legal environments explain cross-country variations in IPO underpricing?‘. Applied Economics, 45(4), 435–454 CrossRef
go back to reference Hughes, P. J. (1986). ‘Signalling by direct disclosure under asymmetric information’. Journal of Accounting and Economics, 8(2), 119–142 CrossRef Hughes, P. J. (1986). ‘Signalling by direct disclosure under asymmetric information’. Journal of Accounting and Economics, 8(2), 119–142 CrossRef
go back to reference Hughes, P. J., & Thakor, A. V. (1992). ‘Litigation risk, intermediation, and the underpricing of initial public offerings’. The Review of Financial Studies, 5(4), 709–742 CrossRef Hughes, P. J., & Thakor, A. V. (1992). ‘Litigation risk, intermediation, and the underpricing of initial public offerings’. The Review of Financial Studies, 5(4), 709–742 CrossRef
go back to reference Hung, Y. S., & Cheng, Y. C. (2018). ‘The impact of information complexity on audit failures from corporate fraud: Individual auditor level analysis’. Asia Pacific Management Review, 23(2), 72–85 CrossRef Hung, Y. S., & Cheng, Y. C. (2018). ‘The impact of information complexity on audit failures from corporate fraud: Individual auditor level analysis’. Asia Pacific Management Review, 23(2), 72–85 CrossRef
go back to reference Hwang, J. H., Kim, J., & Park, J. (2021). ‘Underwriters’ price support regulation and institutional investors’ trading: The case of the putback option’. Research in International Business and Finance, 57, 101401 CrossRef Hwang, J. H., Kim, J., & Park, J. (2021). ‘Underwriters’ price support regulation and institutional investors’ trading: The case of the putback option’. Research in International Business and Finance, 57, 101401 CrossRef
go back to reference Ipsen, A. (2020). ‘Repeat players, the law, and social change: Redefining the boundaries of environmental and labor governance through preemptive and authoritarian legality’. Law & Society Review, 54(1), 201–232 CrossRef Ipsen, A. (2020). ‘Repeat players, the law, and social change: Redefining the boundaries of environmental and labor governance through preemptive and authoritarian legality’. Law & Society Review, 54(1), 201–232 CrossRef
go back to reference Jamaani, F., & Ahmed, A. D. (2020). ‘Simultaneous effects of clustering and endogeneity on the underpricing difference of IPO firms: A global evidence’. Research in International Business and Finance, 54, 101250 CrossRef Jamaani, F., & Ahmed, A. D. (2020). ‘Simultaneous effects of clustering and endogeneity on the underpricing difference of IPO firms: A global evidence’. Research in International Business and Finance, 54, 101250 CrossRef
go back to reference Jamaani, F., & Ahmed, A. D. (2021). ‘Modifier effects of country-level transparency on global underpricing difference: New hierarchical evidence’. International Review of Financial Analysis, 74, 101667 CrossRef Jamaani, F., & Ahmed, A. D. (2021). ‘Modifier effects of country-level transparency on global underpricing difference: New hierarchical evidence’. International Review of Financial Analysis, 74, 101667 CrossRef
go back to reference Jamaani, F., & Ahmed, A. D. (2022). ‘The psychological and economic roles of culture on global underpricing difference: A new hierarchical evidence’. Journal of Behavioral and Experimental Finance, 33, 100615 CrossRef Jamaani, F., & Ahmed, A. D. (2022). ‘The psychological and economic roles of culture on global underpricing difference: A new hierarchical evidence’. Journal of Behavioral and Experimental Finance, 33, 100615 CrossRef
go back to reference Jamaani, F., & Alidarous, M. (2019). ‘Review of Theoretical Explanations of IPO Underpricing’. Journal of Accounting Business and Finance Research, 6(1), 1–18 CrossRef Jamaani, F., & Alidarous, M. (2019). ‘Review of Theoretical Explanations of IPO Underpricing’. Journal of Accounting Business and Finance Research, 6(1), 1–18 CrossRef
go back to reference Jamaani, F., & Alidarous, M. (2021). ‘The short-and long-lived effects of IFRS mandate on IPO firms in emerging market economies’, Journal of Financial Reporting and Accounting Jamaani, F., & Alidarous, M. (2021). ‘The short-and long-lived effects of IFRS mandate on IPO firms in emerging market economies’, Journal of Financial Reporting and Accounting
go back to reference Johannesen, N., & Zucman, G. (2014). ‘The end of bank secrecy? An evaluation of the G20 tax haven crackdown’. American Economic Journal: Economic Policy, 6(1), 65–91 Johannesen, N., & Zucman, G. (2014). ‘The end of bank secrecy? An evaluation of the G20 tax haven crackdown’. American Economic Journal: Economic Policy, 6(1), 65–91
go back to reference Khurana, I. K., Lundstrom, N. G., & Raman, K. (2021). ‘PCAOB inspections and the differential audit quality effect for Big 4 and non–Big 4 US auditors’. Contemporary Accounting Research, 38(1), 376–411 CrossRef Khurana, I. K., Lundstrom, N. G., & Raman, K. (2021). ‘PCAOB inspections and the differential audit quality effect for Big 4 and non–Big 4 US auditors’. Contemporary Accounting Research, 38(1), 376–411 CrossRef
go back to reference Khurana, I., Ni, C., & Shi, C. (2017). ‘The role of big 4 auditors in the global primary market: Does audit quality matter most when investors are protected least’, in Asian Bureau of Finance and Economic Research Annual Conference, Gardenia, Azalea Khurana, I., Ni, C., & Shi, C. (2017). ‘The role of big 4 auditors in the global primary market: Does audit quality matter most when investors are protected least’, in Asian Bureau of Finance and Economic Research Annual Conference, Gardenia, Azalea
go back to reference Kirkulak, B., & Davis, C. (2005). ‘Underwriter reputation and underpricing: Evidence from the Japanese IPO market’. Pacific-Basin Finance Journal, 13(4), 451–470 CrossRef Kirkulak, B., & Davis, C. (2005). ‘Underwriter reputation and underpricing: Evidence from the Japanese IPO market’. Pacific-Basin Finance Journal, 13(4), 451–470 CrossRef
go back to reference Krishnan, C., & Masulis, R. W. (2013). ‘Law firm expertise and merger and acquisition outcomes’. The Journal of Law and Economics, 56(1), 189–226 CrossRef Krishnan, C., & Masulis, R. W. (2013). ‘Law firm expertise and merger and acquisition outcomes’. The Journal of Law and Economics, 56(1), 189–226 CrossRef
go back to reference Lawrence, A., Minutti-Meza, M., & Zhang, P. (2011). ‘Can Big 4 versus non-Big 4 differences in audit-quality proxies be attributed to client characteristics?‘. The Accounting Review, 86(1), 259–286 CrossRef Lawrence, A., Minutti-Meza, M., & Zhang, P. (2011). ‘Can Big 4 versus non-Big 4 differences in audit-quality proxies be attributed to client characteristics?‘. The Accounting Review, 86(1), 259–286 CrossRef
go back to reference Lee, H. L., & Lee, H. (2013). ‘Do Big 4 audit firms improve the value relevance of earnings and equity?‘. Managerial Auditing Journal, 28 no(7), 628–646 CrossRef Lee, H. L., & Lee, H. (2013). ‘Do Big 4 audit firms improve the value relevance of earnings and equity?‘. Managerial Auditing Journal, 28 no(7), 628–646 CrossRef
go back to reference Leitterstorf, M. P., & Rau, S. B. (2014). ‘Socioemotional wealth and IPO underpricing of family firms’. Strategic Management Journal, 35(5), 751–760 CrossRef Leitterstorf, M. P., & Rau, S. B. (2014). ‘Socioemotional wealth and IPO underpricing of family firms’. Strategic Management Journal, 35(5), 751–760 CrossRef
go back to reference Liao, Y., Chi, W., & Chen, Y. (2013). ‘Auditor economic dependence and accounting conservatism: Evidence from a low litigation risk setting’. International Journal of Auditing, 17(2), 117–137 CrossRef Liao, Y., Chi, W., & Chen, Y. (2013). ‘Auditor economic dependence and accounting conservatism: Evidence from a low litigation risk setting’. International Journal of Auditing, 17(2), 117–137 CrossRef
go back to reference Lin, H. L., Pukthuanthong, K., & Walker, T. J. (2013). ‘An international look at the lawsuit avoidance hypothesis of IPO underpricing’. Journal of Corporate Finance, 19(1), 56–77 CrossRef Lin, H. L., Pukthuanthong, K., & Walker, T. J. (2013). ‘An international look at the lawsuit avoidance hypothesis of IPO underpricing’. Journal of Corporate Finance, 19(1), 56–77 CrossRef
go back to reference Liu, Y., Li, X., Zeng, H., & An, Y. (2017). ‘Political connections, auditor choice and corporate accounting transparency: evidence from private sector firms in China’. Accounting & Finance, 57(4), 1071–1099 CrossRef Liu, Y., Li, X., Zeng, H., & An, Y. (2017). ‘Political connections, auditor choice and corporate accounting transparency: evidence from private sector firms in China’. Accounting & Finance, 57(4), 1071–1099 CrossRef
go back to reference Liu, X., & Ritter, J. R. (2010). ‘The economic consequences of IPO spinning’. The Review of Financial Studies, 23(5), 2024–2059 CrossRef Liu, X., & Ritter, J. R. (2010). ‘The economic consequences of IPO spinning’. The Review of Financial Studies, 23(5), 2024–2059 CrossRef
go back to reference Liu, X., & Ritter, J. R. (2011). ‘Local underwriter oligopolies and IPO underpricing’. Journal of Financial Economics, 102(3), 579–601 CrossRef Liu, X., & Ritter, J. R. (2011). ‘Local underwriter oligopolies and IPO underpricing’. Journal of Financial Economics, 102(3), 579–601 CrossRef
go back to reference Liu, C., Yao, L. J., Hu, N., & Liu, L. (2011). ‘The impact of IFRS on accounting quality in a regulated market: An empirical study of China’. Journal of Accounting Auditing & Finance, 26(4), 659–676 CrossRef Liu, C., Yao, L. J., Hu, N., & Liu, L. (2011). ‘The impact of IFRS on accounting quality in a regulated market: An empirical study of China’. Journal of Accounting Auditing & Finance, 26(4), 659–676 CrossRef
go back to reference Loughran, T., & Ritter, J. R. (2004). ‘Why has IPO underpricing changed over time?‘, Financial Management, vol. 33, no. 3, pp. 5–37 Loughran, T., & Ritter, J. R. (2004). ‘Why has IPO underpricing changed over time?‘, Financial Management, vol. 33, no. 3, pp. 5–37
go back to reference Lowry, M., Officer, M. S., & Schwert, G. W. (2010). ‘The variability of IPO initial returns’. The Journal of Finance, 65(2), 425–465 CrossRef Lowry, M., Officer, M. S., & Schwert, G. W. (2010). ‘The variability of IPO initial returns’. The Journal of Finance, 65(2), 425–465 CrossRef
go back to reference Lowry, M., & Shu, S. (2002). ‘Litigation risk and IPO underpricing’. Journal of Financial Economics, 65(3), 309–335 CrossRef Lowry, M., & Shu, S. (2002). ‘Litigation risk and IPO underpricing’. Journal of Financial Economics, 65(3), 309–335 CrossRef
go back to reference McClane, J. R. (2015). ‘The sum of its parts: The lawyer-client relationship in initial public offerings’. Fordham L Rev, 84, 131 McClane, J. R. (2015). ‘The sum of its parts: The lawyer-client relationship in initial public offerings’. Fordham L Rev, 84, 131
go back to reference Megginson, W. L., & Weiss, K. A. (1991). ‘Venture capitalist certification in initial public offerings’. The Journal of Finance, 46(3), 879–903 CrossRef Megginson, W. L., & Weiss, K. A. (1991). ‘Venture capitalist certification in initial public offerings’. The Journal of Finance, 46(3), 879–903 CrossRef
go back to reference Moran, P., & Pandes, J. A. (2019). ‘Elite law firms in the IPO market’. Journal of Banking & Finance, 107, 105612 CrossRef Moran, P., & Pandes, J. A. (2019). ‘Elite law firms in the IPO market’. Journal of Banking & Finance, 107, 105612 CrossRef
go back to reference Neupane, S., & Thapa, C. (2013). ‘Underwriter reputation and the underwriter–investor relationship in IPO markets’. Journal of International Financial Markets Institutions and Money, 24(1), 105–126 CrossRef Neupane, S., & Thapa, C. (2013). ‘Underwriter reputation and the underwriter–investor relationship in IPO markets’. Journal of International Financial Markets Institutions and Money, 24(1), 105–126 CrossRef
go back to reference Okamoto, K. S. (1995). ‘Reputation and the value of lawyers’. Or L Rev, 74, 15 Okamoto, K. S. (1995). ‘Reputation and the value of lawyers’. Or L Rev, 74, 15
go back to reference Poghosyan, T. (2013). ‘Financial intermediation costs in low income countries: The role of regulatory, institutional, and macroeconomic factors’. Economic Systems, 37(1), 92–110 CrossRef Poghosyan, T. (2013). ‘Financial intermediation costs in low income countries: The role of regulatory, institutional, and macroeconomic factors’. Economic Systems, 37(1), 92–110 CrossRef
go back to reference Premti, A., & Smith, G. (2020). ‘Earnings management in the pre-IPO process: Biases and predictors’. Research in International Business and Finance, 52, 101120 CrossRef Premti, A., & Smith, G. (2020). ‘Earnings management in the pre-IPO process: Biases and predictors’. Research in International Business and Finance, 52, 101120 CrossRef
go back to reference Rathnayake, D. N., Louembé, P. A., Kassi, D. F., Sun, G., & Ning, D. (2019). ‘Are IPOs underpriced or overpriced? Evidence from an emerging market’. Research in International Business and Finance, 50, 171–190 CrossRef Rathnayake, D. N., Louembé, P. A., Kassi, D. F., Sun, G., & Ning, D. (2019). ‘Are IPOs underpriced or overpriced? Evidence from an emerging market’. Research in International Business and Finance, 50, 171–190 CrossRef
go back to reference Razafindrambinina, D., & Kwan, T. (2013). ‘The influence of underwriter and auditor reputations on IPO under-pricing’. European Journal of Business and Management, 5(2), 199–212 Razafindrambinina, D., & Kwan, T. (2013). ‘The influence of underwriter and auditor reputations on IPO under-pricing’. European Journal of Business and Management, 5(2), 199–212
go back to reference Schneider, C. W., Manko, J. M., & Kant, R. S. (1981). ‘Going public: practice, procedure, and consequences’. Vill L Rev, 27(1), 1–52 Schneider, C. W., Manko, J. M., & Kant, R. S. (1981). ‘Going public: practice, procedure, and consequences’. Vill L Rev, 27(1), 1–52
go back to reference Shapiro, C. (1983). ‘Premiums for high quality products as returns to reputations’. The Quarterly Journal of Economics, 98(4), 659–679 CrossRef Shapiro, C. (1983). ‘Premiums for high quality products as returns to reputations’. The Quarterly Journal of Economics, 98(4), 659–679 CrossRef
go back to reference Shi, C., Pukthuanthong, K., & Walker, T. (2013). ‘Does disclosure regulation work? Evidence from international IPO markets’. Contemporary Accounting Research, 30(1), 356–387 CrossRef Shi, C., Pukthuanthong, K., & Walker, T. (2013). ‘Does disclosure regulation work? Evidence from international IPO markets’. Contemporary Accounting Research, 30(1), 356–387 CrossRef
go back to reference Spathis, C. T. (2002). ‘Detecting false financial statements using published data: Some evidence from Greece’. Managerial Auditing Journal, 17(4), 179–191 CrossRef Spathis, C. T. (2002). ‘Detecting false financial statements using published data: Some evidence from Greece’. Managerial Auditing Journal, 17(4), 179–191 CrossRef
go back to reference Sundarasen, S. D., Khan, A., & Rajangam, N. (2018). ‘Signalling roles of prestigious auditors and underwriters in an emerging IPO market’. Global Business Review, 19(1), 69–84 CrossRef Sundarasen, S. D., Khan, A., & Rajangam, N. (2018). ‘Signalling roles of prestigious auditors and underwriters in an emerging IPO market’. Global Business Review, 19(1), 69–84 CrossRef
go back to reference Sundarasen, S., Kamaludin, K., Ibrahim, I., Rajagopalan, U., & Danila, N. (2021). ‘Auditors, underwriters, and firm owners’ interaction in an IPO environment: The case of oecd nations’, Sustainability, vol. 13, no. 11, p. 6281 Sundarasen, S., Kamaludin, K., Ibrahim, I., Rajagopalan, U., & Danila, N. (2021). ‘Auditors, underwriters, and firm owners’ interaction in an IPO environment: The case of oecd nations’, Sustainability, vol. 13, no. 11, p. 6281
go back to reference Titman, S., & Trueman, B. (1986). ‘Information quality and the valuation of new issues’. Journal of Accounting and Economics, 8(2), 159–172 CrossRef Titman, S., & Trueman, B. (1986). ‘Information quality and the valuation of new issues’. Journal of Accounting and Economics, 8(2), 159–172 CrossRef
go back to reference Torstila, S. (2003). ‘The clustering of IPO gross spreads: International evidence’. Journal of Financial and Quantitative Analysis, 38(3), 673–694 CrossRef Torstila, S. (2003). ‘The clustering of IPO gross spreads: International evidence’. Journal of Financial and Quantitative Analysis, 38(3), 673–694 CrossRef
go back to reference Tutuncu, L. (2019). ‘Lock-up provisions and valuation of Turkish IPOs’. Eurasian Business Review, 10(1), 587–608 Tutuncu, L. (2019). ‘Lock-up provisions and valuation of Turkish IPOs’. Eurasian Business Review, 10(1), 587–608
go back to reference Utset, M. A. (1995). ‘Producing information: Initial public offerings, production costs, and the producing lawyer’. Oregon Law Review, 74, 280–312 Utset, M. A. (1995). ‘Producing information: Initial public offerings, production costs, and the producing lawyer’. Oregon Law Review, 74, 280–312
go back to reference Vinten, G., Chen, K. Y., Lin, K. L., & Zhou, J. (2005). ‘Audit quality and earnings management for Taiwan IPO firms’. Managerial Auditing Journal, Vol. 20 no, 86–104 Vinten, G., Chen, K. Y., Lin, K. L., & Zhou, J. (2005). ‘Audit quality and earnings management for Taiwan IPO firms’. Managerial Auditing Journal, Vol. 20 no, 86–104
go back to reference Wang, X., & Song, D. (2021). ‘Does local corruption affect IPO underpricing? Evidence from China’. International Review of Economics & Finance, 73, 127–138 CrossRef Wang, X., & Song, D. (2021). ‘Does local corruption affect IPO underpricing? Evidence from China’. International Review of Economics & Finance, 73, 127–138 CrossRef
go back to reference Westfall, T. J., & Omer, T. C. (2018). ‘The emerging growth company status on IPO: Auditor effort, valuation, and underpricing’. Journal of Accounting and Public Policy, 37(4), 315–334 CrossRef Westfall, T. J., & Omer, T. C. (2018). ‘The emerging growth company status on IPO: Auditor effort, valuation, and underpricing’. Journal of Accounting and Public Policy, 37(4), 315–334 CrossRef
go back to reference Willenborg, M. (1999). ‘Empirical analysis of the economic demand for auditing in the initial public offerings market’. Journal of Accounting Research, 37(1), 225–238 CrossRef Willenborg, M. (1999). ‘Empirical analysis of the economic demand for auditing in the initial public offerings market’. Journal of Accounting Research, 37(1), 225–238 CrossRef
go back to reference Wyatt, A. (2014). ‘Is there useful information in the ‘use of proceeds’ disclosures in IPO prospectuses?‘, Accounting & Finance, vol. 54, no. 2, pp. 625 – 67 Wyatt, A. (2014). ‘Is there useful information in the ‘use of proceeds’ disclosures in IPO prospectuses?‘, Accounting & Finance, vol. 54, no. 2, pp. 625 – 67
go back to reference Zaremba, A., & Żmudziński, R. (2014). ‘IPO underpricing puzzle: The election gimmick hypothesis’. Copernican Journal of Finance & Accounting, 3(2), 167–181 CrossRef Zaremba, A., & Żmudziński, R. (2014). ‘IPO underpricing puzzle: The election gimmick hypothesis’. Copernican Journal of Finance & Accounting, 3(2), 167–181 CrossRef
go back to reference Zaremba, A., & Kaminski, K. (2011). ‘Ipos–not so much money left on the table. The cost compensation hypothesis’, Argumenta Oeconomica, vol. 1, no. 26, pp. 149 – 75 Zaremba, A., & Kaminski, K. (2011). ‘Ipos–not so much money left on the table. The cost compensation hypothesis’, Argumenta Oeconomica, vol. 1, no. 26, pp. 149 – 75
go back to reference Zaremba, A., & Szyszka, A. (2016). ‘Is the abnormal post-IPO underperformance really abnormal? The evidence from CEE emerging markets’, Emerging Markets Finance and Trade, vol. 52, no. 12, pp. 2721-39 Zaremba, A., & Szyszka, A. (2016). ‘Is the abnormal post-IPO underperformance really abnormal? The evidence from CEE emerging markets’, Emerging Markets Finance and Trade, vol. 52, no. 12, pp. 2721-39
Metadata
Title
Does the appointment of the three musketeers reduce IPO underpricing? global evidence
Authors
Fouad Jamaani
Manal Alidarous
Publication date
19-09-2022
Publisher
Springer International Publishing
Published in
Eurasian Business Review
Print ISSN: 1309-4297
Electronic ISSN: 2147-4281
DOI
https://doi.org/10.1007/s40821-022-00219-y

Premium Partner