This study examines the impact of country-level corruption on IPO underpricing globally. Using a comprehensive sample of 17,806 IPOs across 47 countries, we document a robust positive relation between corruption and IPO underpricing, consistent with corruption increasing information asymmetry and investor uncertainty. We further show that this effect is stronger in highly corrupt countries and becomes negative in the least corrupt countries, highlighting the non-linear role of institutional quality. Importantly, while corruption remains a significant determinant of underpricing for both domestic and foreign IPOs, its impact is partially mitigated for firms listing abroad, consistent with enhanced certification and regulatory scrutiny in international markets. We also find that reputable underwriters and Big 4 auditors attenuate the adverse effects of corruption on IPO pricing. Overall, our findings highlight corruption as a distinct informational channel affecting IPO outcomes and demonstrate how external certification mechanisms can improve pricing efficiency in weak institutional environments.
Khiar et al. (Sun,) studied this question.