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Local IPOs, local delistings, and the firm location premium

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  • Baschieri, Giulia
  • Carosi, Andrea
  • Mengoli, Stefano
Abstract
Borrowing a measure from ecology, we introduce a spatial dispersion index to quantify the firm traits related to firm geographic location and investigate firm exposure to local home bias and local investor risk tolerance as determinants of corporate market value. Consistent with the investor preference for local stocks, we find listed firms benefit from a location premium that increases with firm isolation and local investor wealth. IPOs and delistings are found to affect the market value of neighboring listed firms: isolated firms decrease in value when they cluster due to local IPOs while clustered firms increase in value as they become more isolated due to local delistings. Local firm clustering and risk tolerance also affect IPO underpricing. Empirical findings depict a framework where IPOs and delistings are locally jointly determined.

Suggested Citation

  • Baschieri, Giulia & Carosi, Andrea & Mengoli, Stefano, 2015. "Local IPOs, local delistings, and the firm location premium," Journal of Banking & Finance, Elsevier, vol. 53(C), pages 67-83.
    • Handle: RePEc:eee:jbfina:v:53:y:2015:i:c:p:67-83
    DOI: 10.1016/j.jbankfin.2014.12.012
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    Cited by:

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    3. Frank Packer & Mark M. Spiegel, 2020. "Competitive Effects of IPOS: Evidence from Chinese Listing Suspensions," Working Paper Series 2020-30, Federal Reserve Bank of San Francisco.
    4. Dougal, Casey & Rettl, Daniel A., 2021. "Firm listing status and the investment home bias," Journal of Corporate Finance, Elsevier, vol. 71(C).
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    6. Espenlaub, Susanne & Goyal, Abhinav & Mohamed, Abdulkadir, 2016. "Impact of legal institutions on IPO survival: A global perspective," Journal of Financial Stability, Elsevier, vol. 25(C), pages 98-112.
    7. Harris, Oneil, 2018. "The impact of industrial districts on the pricing of IPOs," The Quarterly Review of Economics and Finance, Elsevier, vol. 69(C), pages 274-285.
    8. Giulia Baschieri & Andrea Carosi & Stefano Mengoli, 2023. "Local IPO waves, local shocks, and the going public decision," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(3), pages 2565-2589, July.
    9. Liu, Lewis & Neupane, Suman & Zhang, Lei, 2022. "Firm location effect on underwriting, subscription, and underpricing: Evidence from IPOs in China," Economic Modelling, Elsevier, vol. 108(C).
    10. Feng, Yi & Song, Keke & Tian, Yisong S., 2019. "Director networks and initial public offerings," Journal of Banking & Finance, Elsevier, vol. 106(C), pages 246-264.
    11. Baschieri, Giulia & Carosi, Andrea & Mengoli, Stefano, 2016. "Does the earnings quality matter? Evidence from a quasi-experimental setting," Finance Research Letters, Elsevier, vol. 19(C), pages 146-157.

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    More about this item

    Keywords

    Location premium; Local home bias; IPO; Delisting; Underpricing;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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