Loan market benefits of (High) IPO underpricing

Xunhua Su, Donghang Zhang*, Xiaoyu Zhang

*Corresponding author for this work

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

We provide novel evidence on the loan market benefits of high IPO underpricing. We show that greater underpricing is associated with a significantly larger within-firm reduction of post-IPO borrowing costs. This benefit of underpricing is less pronounced for firms with high ex-ante information asymmetry and is concentrated in firms with a high demand for advertisements. In addition, neither price revision before the IPO nor the short-term or long-term stock return after the IPO has a similar effect. Our results suggest that underpricing affects borrowing costs through an attention channel and highlight a real economic effect of underpricing from the loan market.

Original languageEnglish
Article number101132
Pages (from-to)1-18
Number of pages18
JournalJournal of Financial Intermediation
Volume61
Early online date31 Dec 2024
DOIs
Publication statusPublished - Jan 2025

Bibliographical note

Publisher Copyright:
© 2024 Elsevier Inc.

Keywords

  • Borrowing costs
  • IPO
  • Loan spreads
  • Syndicated loans
  • Underpricing

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