Corporate governance and IPO underpricing throughout the world: agency and institutional perspectives

Previous comparative corporate governance research on IPOs has focused on either the firm- or national-level of analysis, but never both at the same time due to data limitations. Using a unique hand-collected sample of 1,200 IPOs across 20 countries during our study period of 2006-08, we examine both board- and national-level predictors of IPO underpricing after controlling for firm-, industry-, and time-related variables. Notably, our sample of economies represented nearly two-thirds of the global economy in 2008. Overall, we find limited empirical support for agency explanations, but relatively strong support for institutional explanations of IPO underpricing. Specifically, the level of protection of shareholder rights was found to be negatively related and common law legal systems were found to be positively related to IPO underpricing throughout the world. Our findings have important implications for the comparative corporate governance literature and institutional theory