Societal secrecy and ADR IPOs underpricing

Abstract

This study examines 350 Level III ADR IPOs from 35 countries between 1990 and 2020 to explore the link between societal secrecy and IPO underpricing. Focusing on ADR IPOs, we hypothesize that firms from higher secrecy countries, compared to firms from low secrecy countries, benefit more from public offerings in a low secrecy country. U.S. investors might value these firms relatively more due to the reduction in information asymmetry and higher expected diversification benefits. The results support our hypothesis, showing that ADR IPO underpricing is lower for ADRs from high secrecy countries. These findings hold true across various measures and controls, ensuring robustness.