The impact of national culture on IPO underpricing and its influence mechanism: A cross-border empirical research

Zhou, Xiaoguang; Tang, Xinmeng; Wu, Shih-Wei

doi:10.1016/j.frl.2021.102543

Cited by 7 publications

(4 citation statements)

References 20 publications

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“…These results support prior studies that have shown that founder status and cultural context impact IPO outcomes (Table A1). Similarly, moderating effects of culture have been found between country-and company-level variables and IPO performance (Cui et al, 2021;Zhou et al, 2022). However, no prior study has examined the interacting effects of the informal institutional environment and CEO founder status.…”

Section: Discussionmentioning

confidence: 93%

“…Prior research based on institutional theory has investigated factors such as country of origin, economic freedom and quality of formal institutions (Costa et al, 2013;Lewellyn and Bao, 2014;Moore et al, 2010). Cultural dimensions such as power distance, masculinity and UA have also been linked to IPO outcomes (Chourou et al, 2018;Zhou et al, 2022).…”

Section: Background 21 Literature Reviewmentioning

confidence: 99%

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The role of national context in the relationship between founder CEO and IPO performance

Tupper

Mehta

2023

MBR

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Purpose Although founders are often replaced with external CEOs prior to firms making IPOs, firms that do retain founder CEOs generally perform better at IPO. However, this relationship may be contingent upon context. This study aims to investigate how national context influences the relationship between a founder CEO and IPO long-run performance. The authors hypothesize that founder-CEOs will perform better in IPO firms in countries where managerial discretion, future orientation, and the level of conformity to professionalize management are high, and uncertainty avoidance is low. Design/methodology/approach Using insights from the upper echelon and institutional theory, the authors used hierarchical linear modeling to analyze over 1,000 firms across eight countries. Findings Founder CEOs perform best in IPO firms in a national context where managerial discretion is low, uncertainty avoidance is high and the level of conformity is high. Originality/value This study contributes to a growing area of cross-national IPO research in management by investigating the relationship between culture, management and IPO performance.

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Section: Discussionmentioning

confidence: 93%

Section: Background 21 Literature Reviewmentioning

confidence: 99%

The role of national context in the relationship between founder CEO and IPO performance

Tupper

Mehta

2023

MBR

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“…It reflects the extent to which a culture educates its people to feel uncomfortable or comfortable in unstructured conditions. Unstructured circumstances are novel, unfamiliar, shocking, or out of the ordinary [ 26 , 27 ]. Uncertainty avoidance culture aims to reduce the potential of such circumstances by tight laws and standards, as well as safety and security measures, while countries with high uncertainty avoidance are also more emotional and motivated by inner nervous energy [ 28 ].…”

Section: Theoretical Frameworkmentioning

confidence: 99%

Uncertainty avoidance and investment underdiversification

Tang

Zhou

2022

PLoS ONE

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The relationship between the cultural dimension of uncertainty avoidance and investment underdiversification is examined. A theoretical link between uncertainty avoidance and ambiguity is established, that is, cultural uncertainty avoidance captures the aversion attitude towards ambiguity at the national group level, thus, cultural dimension of uncertainty avoidance influences investors’ behavioral biases of home bias and the investment abroad concentration. The empirical results show that investment underdiversification is significantly and positively affected by the degree of uncertainty avoidance and robustness tests support this conclusion. A further analysis reveals that uncertainty avoidance moderates the effects of ambiguity on investment underdiversification, whereas the effects of uncertainty avoidance are mediated by the status quo bias.

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“…The theory of behavioral finance can be used to improve the applicability of multi-factor models in different markets. The investor structure and behavior of developed markets and emerging markets are very different, and ignoring these differences will inevitably lead to the failure of pricing models (Guo et al, 2017;Liu et al, 2019;Raut, 2020;Zhou et al, 2022). In contrast to the multi-factor pricing model, the behavioral analysis of market traders is a qualitative analysis, which has the advantage of strong dynamic adaptability.…”

Section: Introductionmentioning

confidence: 99%

A six-factor asset pricing model of China's stock market from the perspective of institutional investors' dominance

Zhou

Lin²,

Zhong³

2022

IJOEM

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PurposeChina's stock market, which serves as an example of emerging markets, is steadily maturing in the context of globalization. In order to analyze the pricing mechanism of China's stock market, this paper builds a six-factor model to address the market features that are structurally efficient but not entirely efficient.Design/methodology/approachThis study updates the Fama–French factor model's construction process to account for the unique features of China's stock market before creating a model that incorporates size, volume, value, profitability, and profit-income factors based on institutional investors' trading behavior and research preferences. The SWS three-tier sector stock index's monthly and quarterly data for the years 2016–2021 are used as samples for this study.FindingsThe results imply that China's stock market is structurally efficient and exhibits high levels of rationality in the region dominated by institutional investors. Specifically, big-size and high-volume portfolios that perform well in terms of liquidity can receive trading premiums. Growth-style sectors prevail at present, and investing in sectors with strong profitability and reliable financial reporting data can produce better returns.Practical implicationsThe research on China's stock market can be extended to improve the understanding of the development process of similar emerging markets, thereby promoting their improvement. To enhance the development of emerging markets, the regulators should attach great importance to the role of local institutional investors in driving the market to maturity. It is crucial to adopt a structured approach to examine the market pricing mechanism throughout the middle stage of the transition from developing to mature markets.Originality/valueThis study offers a structured viewpoint on asset pricing in growing emerging markets by combining the multi-factor pricing model approach with behavioral finance theories.

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The impact of national culture on IPO underpricing and its influence mechanism: A cross-border empirical research

Cited by 7 publications

References 20 publications

The role of national context in the relationship between founder CEO and IPO performance

The role of national context in the relationship between founder CEO and IPO performance

Uncertainty avoidance and investment underdiversification

A six-factor asset pricing model of China's stock market from the perspective of institutional investors' dominance

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