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Journal of Economics and Finance

, Volume 43, Issue 1, pp 127–142 | Cite as

The flyover effect on IPO returns

  • Nancy MohanEmail author
Article
  • 79 Downloads

Abstract

Election politics highlighted the flyover label—those states between the two coastal regions of the US. The implication is that the interior part of the country may be viewed as behaviorally different from the coastal regions. This research considers whether this perception passes through to the financial markets. In particular, after accounting for risk and lead underwriter prestige and incorporating the fixed effects of year and industry, is underpricing of IPOs affected by company address—coastal versus non-coastal? The results of this research suggest yes—there is less underpricing for non-coastal companies. Flyover IPOs experience about 5.5% less first-day underpricing. Also, IPOs originating from the flyover states appear to outperform coastal IPOs for both one year and three years post IPO, when comparing compounded wealth relatives (assuming investment at the closing price of the first day of trading).

Keywords

Initial public offering Underpricing Investment banker prestige Long-run performance 

JEL Classification

G30 G32 

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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Department of Economics and FinanceUniversity of DaytonDaytonUSA

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