Economic freedom and IPO underpricing

Frontiers of Business Research in China

Table 7 Robustness Tests by Deleting U.S. and Chinese IPOs and Using Sub-indexes of Economic Freedom (June 1993–December 2014)

Regression	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)
	Coeff	Coeff	Coeff	Coeff	Coeff	Coeff	Coeff	Coeff	Coeff	Coeff
Constant	146.646^b	102.528	142.552	124.419	130.124	160.743^a	162.026^a	160.800^a	140.407^a	203.754^b
PPR	-0.701^c
Crup		-0.678^c
FiscalL			0.214
FreeGov				0.218
Busi					-0.671
Labor						0.037
Mny							−0.063
FreeTrd								-0.550
Ivst									-0.619^c
Fin										-0.268
GDP	4.143	7.097	-4.521	-3.607	2.841	-5.133	-4.660	-0.812	3.426	-3.405
Bear	-17.527^a	-16.608^a	-15.832^a	-16.580^a	-15.962	16.168	-16.070	-16.127	-19.624^a	-18.301^a
Bull	5.927	6.017	6.596^a	6.631^b	6.692^b	6.470^b	6.832^b	6.890^b	6.247^a	6.472^a
AF	0.374	0.381	0.843^a	0.760	0.534	0.777	0.741	0.674	0.600	0.906
SPS	0.701	0.847	0.682	0.796	1.238^b	0.763	0.812	0.765	0.779	0.306
HCB	-6.520^b	-6.648^b	-5.679^a	-5.933^a	-5.274^a	-5.933^a	-5.977^a	-4.945^a	-6.365^a	-5.792^a
Democ	-2.527^b	-2.923^c	-1.607	-1.283	-2.750^a	-2.208	-2.251	-2.326	-2.659^a	-2.188
EM	0.099	0.331	1.124^a	1.135^b	0.410	1.231^b	1.227^b	1.164^a	0.081	0.490
Proceeds	-3.737^c	-3.922^c	-4.174^c	-4.012^c	-4.261^c	-4.225^c	-4.257^c	-4.163^c	-3.705^c	-4.038^c
Oversold	0.106	0.104	0.100	0.096	0.102	0.100	0.101	0.099	0.096	0.105
Uwrt	-3.225	-2.990	-10.283^c	-2.552	-2.911	-3.047	-2.943	-2.590	-2.956	-3.570
ROE	-1.694	-1.220	-1.512	-1.728	-1.249	-1.212	-1.205	-1.482	-2.696	-1.992
Ind	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Year	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Adjusted-R square	0.155	0.156	0.134	0.137	0.146	0.136	0.133	0.136	0.161	0.139
Prob(F-stat)	0.000	0.000	0.000	0.000	0.000	0.000	0.000	0.000	0.000	0.000
No. of Obs	1322	1322	1322	1322	1322	1322	1322	1322	1322	1322

This table provides the regression results ofthe relation between IPO initial returns and the economic freedom index by omitting U.S. and Chinese IPOs over the whole sample period. The 10 sub-indexes are the financial freedom (Fin), investment freedom (Ivst), business freedom (Busi), property rights freedom (PPR), corruption freedom (Crup), fiscal freedom (Fiscal), trade freedom (FreeTrd), government size (FreeGov), monetary freedom (Mny) and labor freedom (Labor) indices. GDP is the logarithm of per capital GDP of the IPO country.Bear and Bull are the pre-IPO bearish and bullish market sentiment variables, respectively. AF is analyst following. SPS is stock price synchronicity. HCB is the home bias index. Democ is democracy index. EM is earnings management measure. Proceeds is the total IPO proceeds of the issuer. Oversold is a dummy variable, which equals to one if the IPO has overallotment, and zero otherwise. Uwrtis a dummy variable, which equals to one if the underwriter of the IPO is among the top three underwriter in the country. ROE is the return on equity of the issuer 12 month before the IPO. Standard errors are clustered by nations and fiscal year. ^a, ^b and ^c represent significance at the 10, 5and 1% levels, respectively