Pricing Performance of Cross-listed and Local IPOs: Evidence from Alternative Investment Market

Abstract

This paper examines the short-run pricing performance of 238 IPOs listed on the Alternative Investment Market (hereafter referred as AIM) during the period from 2007 to 2016. This study measures the short-run pricing behavior of IPOs over the period of first-thirty trading days and finds that IPOs are underpriced by 12.58% on the first trading day which dilutes to 7.57% on the thirtieth trading day. We also report that the level of short-run pricing performance of newly listed IPOs is higher than cross-listed IPOs as these issues may have more uncertainty which results to generate higher abnormal returns. The results also confirm the evidence of investors’ sentiment, underwriters’ prestige, and signaling hypothesis. In addition, most of the proxies related to ex-ante uncertainty are not robust predictors of short-run performance of cross-listed IPOs.