Does culture influence IPO underpricing?

Bruce A. Costa, Anthony Crawford, Keith Jakob

Research output: Contribution to journalArticlepeer-review

31 Scopus citations


This paper examines how cultural differences influence cross-sectional variation in IPO underpricing across 39 countries. We conjecture that cultural difference across geographic boundaries will influence the acceptance of and the expectations for IPO underpricing. Cross-sectional differences in culture are measured using Hofstede's six cultural dimensions. Our analysis shows that high power distance and high long term orientation are significantly associated with higher IPO underpricing. We also show that underpricing is significantly lower in countries characterized by high uncertainty avoidance. When the model is expanded to include legal origin, market based and corporate governance variables, the three cultural factors remain significant. Our findings provide further evidence that culture impacts capital market returns. Overall, our finding that culture impacts IPO underpricing, suggests important implications for policy makers and investors.

Original languageEnglish
Pages (from-to)113-123
Number of pages11
JournalJournal of Multinational Financial Management
Issue number1-2
StatePublished - Apr 2013


The authors appreciate the suggestions and help from Patrick Barkey, Ron Premuroso, and Barbara Reider. This work was supported by a School of Business Administration research grant and a professorship donated by Donald and Carol Jean Byrnes.

FundersFunder number
School of Business Administration


    • Cultural factors
    • Underpricing


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