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In Chinese culture, certain digits are considered lucky and others unlucky. This thesis evaluates how numerical superstition affects financial decision-making in the Chinese A-share IPO market for the period between 2003-2015. Evidence has been found that suggests that numerical superstition influences the initial return on the issuing day of A-share IPOs on the Shanghai exchange. On this exchange newly listed firms with the unlucky number 4 and lucky numbers 6 and 8 in their ticker are initially traded at a discount. A superstition effect for the lucky numbers 6 and 8 dissipates after the first trading day but remains visible after the IPO for the unlucky number 4 and disappears within a month. The Shenzhen exchange showed no effects of numerical superstition on the initial return of the first trading date. The additional regression results indicate that after one month and onwards, having an unlucky number in a ticker has a negative influence on IPO underpricing . After the 3rd and 6th month the lucky number 6 is has a significant negative impact on stock return.

The dissertation examines IPO underpricing and long-term performance to assess the use of industry specialization as a differentiation strategy by audit firms and underwriters. Prior studies indicate that prestigious auditors or underwriters (e.g., Big 6 auditors) are associated with IPO underpricing. I extend existing literature by incorporating market share as a refined measure of auditor (underwriter) reputation. In particular, I define a differentiated auditor (underwriter) as the market leader that possesses significantly higher market share than their competitors in the client industry. I hypothesize that the impact of auditor (underwriter) reputation in the IPO setting depends on whether the audit firm (underwriter) has successfully differentiated itself from competitors within client industries. My results show that as audit firm (underwriter) industry market share increases without differentiation, the IPO underpricing increases. It appears that this group of auditors (underwriters) intentionally engages in high-risk IPOs in order to gain fee advantages. In contrast, differentiated auditors (underwriters) are related to lower IPO underpricing because their reputation assist in reducing information asymmetry between issuers and investors. My study is important because it shows that the benefits previously thought to be attributable to a very large set of auditors and underwriters stems primary

The restrictive listing requirements imposed by the Main Market of the London Stock Exchange results in the listing of high quality companies, while at the same time provides a higher degree of investor protection. These requirements can however be an obstacle for small and growing companies to go public and raise capital. Thus AIM has developed in order to facilitate the growth of these companies by its lighter listing requirements. This thesis is focused on three outcomes of the lighter listing requirements of AIM. First, AIM companies have a high ownership concentration and lower investor protection, thus enabling blockholders to have a significant impact on their value. This thesis finds that non-managerial and managerial blockholders have quadratic and cubic relationships with firm value respectively. Also, both types of blockholder increase the value of the firm until the first break point which is approximately 30 percent. This is almost exactly the point that the LSE defines as a cut-off point at which the blockholder is regarded as a controlling shareholder. Second, companies moving from the Main market to the AIM impair their information environment when entering the AIM; the information environment is measured by the stock’s liquidity and volatility. This thesis finds that firms experience lower trading activity and lower trading volume, which results in lower liquidity and volatility than matched companies that remain in the Main Market. Third, IPOs listing in the AIM are underpriced in order to compensate for risk. However, the level of underpricing can be alleviated by appointing a reputable Nomad. Underpricing facilitates IPOs to achieve higher aftermarket liquidity in two ways: First, directly by attracting investor attention; and second by diversifying ownership. However, aftermarket liquidity is evident for a longer period than other markets because of a longer lock up period.

Increasing numbers of foreign firms are holding cross-border IPOs in attempts to raise capital in markets outside of their home nation. Within the United States cross-border IPOs consistently experience greater amounts of underpricing than domestic IPOs. This paper examines the effects of SIC industry classifications on cross-border and domestic IPO underpricing from 2004-2010. Analysis demonstrates that in various industries, SIC classification has a significant impact upon underpricing in comparison to other industries. While in other industries, significance is solely exhibited through the differing impacts of domestic and cross-border IPOs, within the industry itself, upon underpricing. The most significant industry effect is seen in high-technology industries which display a significant impact on underpricing on both the inter-industry and intra-industry level.

The closing price first day of trading has historically been found to exceed the offer price set in IPOs, implying that many issuing firms tend to leave money on the table in their IPO. This thesis examines the level of IPO underpricing in Sweden using unique data of IPO transactions on the largest Swedish stock exchanges during 2010-2016. It further discusses the valuation difficulties using the most common valuation methods for firms exhibiting characteristics commonly shared by technological firms. Univariate and multivariate tests confirm the existence of underpricing on Swedish stock exchanges during the period of study. Firms in the technological sector are found to experience both high average levels of underpricing and great variance in initial returns, suggesting potential difficulties valuing technological firms. Robust univariate tests do however not yield a significant result of greater variance in initial returns compared to rest of the sample. By using regression analysis, I find capital raised relative to market capitalization to have significant negative effect on initial returns.

The initial public offering (IPO) underpricing phenomenon has frequently been noticed and generally is accepted as a puzzle in financial economics. Some of the new theories, such as behavioural finance, take the underpricing puzzle as one important form of evidence. However, some aspects of IPO underpricing have not yet been fully documented and discussed in the existing literature. This thesis tries to contribute in the following three specific areas. First, we focus on the time series properties of the level of underpricing of IPO shares and document the IPO market in the Hong Kong market from 1999 to 2005. In the data sample, strong autocorrelation within the level of underpricing has been discovered. Evidence suggests the initial selling volume plays an important role in the relationship. The links between underpricing and clustering of IPOs within different industries are weak, suggesting the reasons for underpricing are related to the market liquidity rather than to the industry-specific risk characteristics. Second, we investigate the underwriting networks to explore the relationship between underwriting business and IPO related puzzles. We find that in repeated IPOs, underwriters build up reputation and accumulate knowledge of their underwriting services. One of the great advantages of the top ranked underwriters is their relationship networks with other underwriters and institutional investors. We perform a careful examination of the underwriter syndicate and investigate the relationship of the structure of the syndicate in respect of IPO performance. Moreover, the pattern of distribution in the size of syndicates is identified and is found to be significantly related to the IPO performance. The research shows that the perspective from the underwriter syndicate is not only interesting, also necessary to understand IPOs. Third, we analyse the coordination problem in the IPO. In the research, we consider the auction method as a one-stage selling and the bookbuilding method as a two-stage selling method. The model suggests that the relationship between the underpricing level and the quality of IPO shares is non-monotone. This implication is consistent with empirical observations. In addition, regarding the issuers' proceeds in the IPOs, the auction method is better than the bookbuilding method in both noisy and noisy vanishing equilibria. The bookbuilding method may be helpful in other ways, such as maintaining liquidity or price support in secondary market. By studying liquidity, business networks and the coordination problem, the thesis does not only complement the existing research by providing unique explanations for the IPO underpricing and other related puzzles, but also opens some interesting venues for future research.

This thesis investigates three topics in empirical corporate finance. In the first essay, the focus is on the role of financial constraints in the market for corporate control. In the second and third essays, we explore the effect of personal connections at board and executive levels on corporate credit rating and initial public offering (IPO) underpricing respectively. In the first essay, using a large sample of US acquisitions made between 1985 and 2013, we study the effect of financial constraints on acquisition gains and acquisition likelihood. Our findings show that financial constraints of target companies significantly increase acquisition premiums and abnormal returns for both parties. Our results further show that the presence of financial constraints in the target is one of the most important determinants of a takeover bid. This supports the idea that acquisitions may improve the ability of financially constrained companies to access capital through a better reallocation of resources within segments of the same company (e.g., internal capital market) or through better access to external markets. This would eventually benefit bidders too, as new capital would be invested in valuable growth opportunities that otherwise would expire unexercised. In the second essay, using a large sample of US public debt issues we show that personal connections between directors of issuing companies and rating agencies result in higher credit ratings. We estimate the average effect to be about one notch. The results are robust to several alternative tests including additional controls for managerial traits, placebo tests and propensity score matching. Moreover, our tests on default rates and bond yields do not appear to reflect a favourable treatment by the rating agency. Rather, they suggest that personal connections act as a mechanism to reduce asymmetric information between the rating agency and the issuer. In the final essay, using a large sample of IPOs in the U.S. we show that interpersonal connections between directors and top executives in issuers and underwriting banks result in significantly lower levels of IPO underpricing. We also examine the issuers' long-term stock returns following their IPOs. Our results indicate that the connected companies' long-term returns are not significantly different from the non-connected companies. This suggests that underwriters set lower levels of underpricing for the connected companies not to treat them favourably, but due to better flow of and stronger reliance on soft information and lower risk exposure.

This thesis examines underpricing in Sweden using unique data on the 185 firms going public through initial public offerings (IPOs) and listing on the Stockholm Stock Exchange between 1994-2011. The average initial return in the Swedish IPO market adjusted for index movements is 11.49% but underpricing of individual IPOs was as high as 241.04%. Further, time trends in underpricing, the level of average initial returns effect on IPO supply underpricing and differences between sectors, segments and investment banks are examined. Finally, it is argued that investors must be rewarded for taking the high risk associated with IPO investing and that the average initial return of 11.49% is a reasonable compensation for that risk.

Background: The post-IPO anomalous behaviour in the short and long-run are among the well-recognised anomalies in corporate finance, and exist on all equity markets. The researchers are not unanimous what causes these phenomena’s, and previous research has primarily focused on the US and European markets. Purpose: The study aims to investigate the market performance of Swedish IPO's in the short- and long-run in-between 2007-2017 for different sectors. Method: The market adjusted initial return method was used to calculate the short-run initial return. The Even-time approach with the Buy-and-hold methodology was used to calculate the long-run abnormal returns. A regression analysis was adopted to investigate the relationship between some existing theories for explaining underpricing. Conclusion: Overall the sample set for the study were on average underpriced with 9,25 %, furthermore, no evidence was found that Swedish IPO’s underperformed in a three-year period compared to the market. Of the theories tested, the signalling hypothesis was significant and can be one determinant for underpricing of Swedish IPO’s.