Table 9 Variable Descriptions

IR

IPO initial return, defined as the ratio of the difference between the first-day closing price and the offering price to the offering price.

TotV

The total value of the IEF, ranging from 0 to 100. All the index data is provided by the American Heritage Foundation.

Rank

Rank of economic freedom. Rank =1, if TotV is between 0 and 49.9; Rank =2, if TotV is between 50 and 59.9; Rank = 3, if TotV is between 60 and 69.9; Rank = 4, if TotV is between 70 and 79.9; and Rank =5, if TotV is between 80 and 100. The higher the rank, the more freedom of an economy.

Fin

The financial freedom sub-index score of the IEF. A higher score of Fin indicates a higher level of financial freedom.

Ivst

The investment freedom sub-index score of the IEF. A higher score of Ivst indicates a higher level of investment freedom.

Busi

The business freedom sub-index score of the IEF. A higher score of Bus indicates a higher level of business freedom.

PPR

The property rights freedom sub-index score of the IEF. A higher score of PPR indicates a higher level of property rights freedom.

Crup

The corruption freedom sub-index score of the IEF. A higher score of Crup indicates a higher level of freedom from corruption.

Fiscal

The value of fiscal freedom sub-index score of the IEF. A higher tax rate results in lower fiscal freedom.

FreeTrd

The value of trade freedom sub-index score of the IEF. A higher tariff tax results in lower trade freedom.

FreeGov

The value of government size sub-index score of the IEF, reflecting how government size and expenditure is weighted in the GDP. Higher government expenditure results in a lower FreeGov freedom score.

Mny

The value of monetary freedom sub-index score of the IEF. Higher disturbances of prices and inflation results in lower monetary freedom.

Labor

The value of labor freedom sub-index score of the IEF. The more flexible labor regulations, the higher labor freedom of the economy.

GDP

GDP per capita of the country.

Bear

Bearish market sentiment dummy variable, equals to one if the MSCI-ACWI index lost 10% during the 3 months just before the IPO date, and zero otherwise.

Bull

Bullish market sentiment dummy variable, equals to one if the MSCI-ACWI index improves 10% during the 3 months just before the IPO date, and zero otherwise.

AF

Analyst following, defined as the median value of firm-year analyst following estimates.

SPS

Stock price synchronicity, defined as a measure of the percentage of stocks moving in step, developed by Morck et al. (2000).

Democ

Democracy index defined by Marshall and Jaggers (2000).

EM

Aggregate earnings management, defined as the average country iranking across the following four earnings management measures: EM ₁ , EM ₂ , EM ₃ , and EM ₄ . EM ₁ is the median ratio in country iof the firm-level standard deviations of operating earnings over the cashflow from operations (both scaled by lagged total assets), multiplied by −1. EM ₂ is the cross-sectional correlation in country ibetween the change in accruals and change in cash flows from operations (both scaled by lagged total assets),multplied by −1. EM ₃ is the median ratio in country iof the absolute value of accruals over the absolute value of cash flow from operations. EM ₄ is the ratio in country iof the number of firms reporting small profits over the sum of the number of firms reporting small losses and small profits. A small profit (loss) is defined as a value of net earnings scaled by lagged total assets in the range [0, 0.01] ([–0.01, 0]).

HB

Home bias, defined as the logarithm value of the ratio of home mutual fund investment weight in home stocks over the home stock market capitalization weight in the world market.

LawSys

Common law system dummy variable, equals to one if a country belongs to the common law system, and zero otherwise, data are collected from LLSV (1998).

Uwrt

Underwriter reputation dummy variable, equaling to one if the underwriter of the IPO is among the top three underwriters in the country.

ROE

Return on equity of the issuer 12 month before the IPO.

Proceeds

The natural logarithm of the total IPO proceeds of the issuer.

Oversold

Dummy variable, equals to one if the IPO has overallotment.

Ind

Industry dummy variables.

Country

County dummy variables.

Year

Year fixed effect dummy variable.