Market integration, country institutions and IPO underpricing

Gianluca Marcato, Stanimira Milcheva, Chen Zheng

Research output: Contribution to journalArticlepeer-review

21 Citations (SciVal)


We extend the IPO literature analysing the role of financial market integration in the development of IPO markets and the pricing of newly listed stocks. Using a hierarchical linear model, we show that differences in underpricing between markets with high and low financial integration levels are economically significant and may explain the choice of location in the listing process. Firstly, market integration negatively affects the level of IPO underpricing by increasing the importance and efficiency of the financial intermediation process via tradable securities. Secondly, the presence of a deeper market integration has a moderation effect, which weakens the explanatory power of country institutions in the cross-country variation of IPO underpricing. Finally, we suggest a hierarchical structure be assumed for the modelling of cross-country IPO studies with heterogeneous country characteristics. Our results are robust to alternative measures of financial integration and several model specifications.

Original languageEnglish
Pages (from-to)87-105
Number of pages19
JournalJournal of Corporate Finance
Publication statusPublished - 31 Dec 2018

Bibliographical note

Publisher Copyright:
© 2018 Elsevier B.V.


  • Country institutions
  • Financial market integration
  • Foreign IPOs
  • Hierarchical linear modelling
  • IPO underpricing

ASJC Scopus subject areas

  • Business and International Management
  • Finance
  • Economics and Econometrics


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