The Impact of First-Day Returns on the Listing Location Decision in International IPOs

Abstract: The thesis at hand introduces historical first-day returns as a predictor for the listing location decision in international initial public offerings (IPO). Furthermore, it examines the moderating impact of firm characteristics on the effect of first-day returns. We use data from nine of the most important countries for international IPOs since 2000 and test hypotheses derived from previous research on foreign listings and IPO underpricing. Using a linear probability model we find that historical first-day returns tend to increase the listing probability in the according country. We argue that our results support existing theories which claim positive first-day returns to be desirable for firms, but that firms do not seem to be able to fully control the degree of underpricing. Moreover, we affirm our hypothesis that high-tech firms tend to avoid countries with high average underpricing, and find indications that the perception of first-day returns is not constant over time and is moderated by firm nationality.