The Impact of Chairman's Education on IPO Price Underpricing -- Regulation of corporate P/E ratio

Abstract

Based on behavioral finance theory, we empirically test the effect of the chairman's education on IPO price underpricing and analyze the moderating role played by the firm's P/E ratio. The results show that the chairman's education is significantly and positively related to IPO price underpricing, while the increase in the P/E ratio significantly mitigates the positive effect of the chairman's education on IPO price underpricing. Further study shows that the positive effect of the chairman's education on IPO price underpricing is more significant in stocks with low turnover rate, while the increase of firm P/E ratio better mitigates the positive effect of chairman's education on IPO price underpricing in stocks with high turnover rate; the positive effect of chairman's education on IPO price underpricing is more significant in firms with low R&D investment, while the increase of firm P/E ratio better mitigates the positive effect of chairman's education on IPO price underpricing in firms with high R&D investment. The positive effect of the chairman's education on IPO price underpricing is more significant in firms with low R&D investment, in contrast, the positive effect of the chairman's education on IPO price underpricing in firms with high R&D investment is better mitigated by the increase in firm P/E ratio. In addition, the effect of the chairman's education on IPO price underpricing is more significant when the chairman is also the CEO, and the moderating effect of the firm's P/E ratio on the relationship between the two is more significant.