IPO underpricing and corporate innovation: evidence from China

Abstract

ABSTRACTThe functions of the stock market such as investment exit mechanism (IPO), interest incentive and capital allocation are beneficial for corporate to engage in innovation activities with higher risk and longer cycle, but IPO underpricing will hinder the realization of such functions. This paper uses the fixed effect model for empirical analysis and finds that the long-term innovation performance of corporate s with IPO underpricing is poor. Mechanism analysis shows that IPO underpricing corporates will have management myopia, lack of R&D enthusiasm that inhibit corporate innovation. Further analysis shows that the improvement of corporate information transparency and institutional investor field research can alleviate this negative impact can alleviate this negative impact. The conclusion of this paper aims to improve efficiency of the capital market, promote the effective pricing of the capital market, and provide certain reference significance for the relevant policies of the capital market to support the high-quality development of the real economy.KEYWORDS: Corporate innovationIPO underpricingmanagement myopiaR&D enthusiasmcorporate information transparencyJEL CLASSIFICATION: G32O31 Disclosure statementNo potential conflict of interest was reported by the author(s).Additional informationFundingQifeng Zhao acknowledges support from the National Natural Science Foundation of China [grant number 72302229]; Di Wu acknowledges support from the Social Science Planning Fund Program, Shandong Province [grant number 22DGLJ13].