Initial Public Offerings: Does Multinationality Matter?

Abstract

The overwhelming literature on short-run and long-run performances of IPOs is yet to address two interesting questions: Are IPOs of multinational firms as underpriced as IPOs of domestic firms and, is the long-run underperformance anomaly shown by multinational and domestic firms alike? This study shows that though, in the short-run, IPOs of multinational firms show a different level of underpricing than that of domestic firms, the behaviour is not statistically significantly different in long-run. Surprisingly, contrary to the expectations multinational firm IPOs are more often underpriced than domestic firm IPOs. Furthermore, a cross-sectional study based on differentiating the domestic and multinational firm IPOs by size and by diversity of products that they manufacture, shows that large multinational firm IPOs are more underpriced than large domestic IPOs and this underpricing becomes more acute for undiversified multinational firm IPOs.

Keywords: IPOs, Multinationality, Short-Run Performance, Long-Run Performance

JEL Classification: F23, G14