Macroeconomic forces behind underpricing

Abstract: The thesis empirically investigates the question whether there is an influence of macroeconomic forces to initial public offering (IPO) underpricing. In addition it tries to find whether unconventional monetary policy has also an impact on underpricing. Thus the thesis tries to find a relationship between macroeconomic variables and the level of IPO underpricing. The variables used as proxies for economic conditions are: interest rate level, GDP growth, consumer confidence index variation and the oil price level. The research is based on IPO data from 20 countries for a sample period of 20 years (1997 – 2017). The so generated data amounts to 7 609 IPO observations. The thesis uses a cross-sectional approach with market adjusted first day returns in several model adjustments. The findings are that macroeconomic variables can explain the level of IPO underpricing. Furthermore, the thesis found that there is a negative relationship between interest rate level and IPO underpricing which proves that unconventional monetary policy affects the level of underpricing.