Underpricing and distance: an empirical analysis

This paper tests the hypothesis that the distance of a firm from the main financial centre affects underpricing positively. The higher is the distance the higher are the information imperfections among players involved in the Initial Public Offering and the higher is the uncertainty about the true value of the listing firm. Econometric results show that, in the Italian case, more distant firms from the financial centre are more underpriced. This finding holds in France but not in Germany suggesting that probably it is due to the spatial organization of the financial system.