IPO Valuation: The International Evidence

Abstract

We study the valuation of 6,199 IPOs during 1998-2015 for the following countries: Australia, Canada, China, Germany, India, Japan, U.K., and U.S. Net income is positively related to IPO valuation in each of the eight countries. The economic impact of net income is largest for Chinese IPOs and smallest for Australian IPOs. Book value is positively and significantly related to IPO valuation in only Canada, Germany, India, and U.S. Capital expenditure is significantly and positively related to IPO valuation in only Canada, Germany, India, U.K., and U.S. We find a positive and statistically significant relation between insider retention and IPO valuation only in China, Germany, U.K., and U.S.; positive but marginally significant relationship for India and Japan. Underwriter reputation has a positive and statistically significant relationship for IPOs only in China, Germany, India, U.K., and U.S. Net income is positively and statistically significantly related to IPO valuation during the years 1998-2015, and this relationship has strengthened over time. Capital expenditure is positively and significantly related to IPO value during 1998-2015, and this relation appears to be stable over time.