Global Diversification and IPO Underpricing
Sammanfattning: We examine whether global diversification is influencing the underpricing of an initial public offering, and hypothesize that it reduces the first day return of an offering. To investigate this, we employ a quantitative approach and conduct OLS regressions with four different independent variables. We use two proxies for global diversification; foreign sales and foreign sales intensity. Further, we investigate whether it makes a difference if the foreign sales are derived from inside Europe or worldwide. We examine a total of 127 listings on the Swedish Stock Exchange during the time period 2012-2020. The study finds statistically significant associations between global diversification and underpricing, supporting the hypothesis that global diversification lowers the underpricing of an IPO. Moreover, we find that foreign sales inside Europe and foreign sales worldwide both decrease underpricing. However, we can neither accept nor reject whether an IPO is more fairly priced if a firm derives foreign sales from inside Europe or worldwide, if either. Our results contribute by generating more recent research on the relationship between global diversification and IPO underpricing, as well as to the IPO literature on the Swedish market.
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