Institutional quality impacts on underpricing of IPOs in the Hong Kong market

• Main Author: Wei, Haitian
• Format: Thesis
• Language: English; English
• Published: 2020
• Subjects: HG Finance
• Online Access: https://etd.uum.edu.my/10375/1/permission%20to%20use-allowed.pdf; https://etd.uum.edu.my/10375/2/s824273_01.pdf; https://etd.uum.edu.my/10375/

This research aims to identify the connection of institutional quality with the underpricing level of IPOs. In Hong Kong, there are large number of IPOs each year. As one of financial market centres in Asia, H-shares attract many investors. Investors have to consider investing environment when searching for the target markets. Hence, this study will offer new insights of determinants of IPO in H-shares. This paper uses cross-sectional analysis and ordinary least squares to find and interpreter the association of institutional quality and the underpricing level of IPO in Hong Kong stock market through information asymmetry, as well as signaling theory. Through theoretical research, it hypothesizes that voice and accountability, political stability, regulatory quality and corruption negatively affect IPO underpricing and also government effectiveness positively related to underpricing. Except for voice and accountability, the expectation of other four independent variables with underpricing are supported by the empirical results of regression. This study is significantly meaningful to investors, companies can governments. The governments and companies should increase the ability of regulatory quality and corruption control which can contribute to rise information transparency, thus attract increasing investors. Also, higher level of government effectiveness is a positive signal to investors.