The impact of prestigious attorneys on IPO withdrawal in the global primary market

Jamaani, Fouad; Alidarous, Manal

doi:10.1186/s40854-023-00555-6

Financial Innovation

Table 9 Additional robustness tests

From: The impact of prestigious attorneys on IPO withdrawal in the global primary market

Variables	Model 16	Model 17	Model 18	Model 19	Model 20	Model 21	Model 22	Model 23
Main variable
Prestigious attorney	− 0.33***	− 0.20***	− 0.35***	− 0.18*	− 0.27***	− 0.22**	− 0.22***	− 0.22***
Prestigious attorney	[− 6.88]	[− 3.73]	[− 7.18]	[− 1.46]	[− 7.13]	[− 2.46]	[− 3.00]	[− 3.65]
IPO firm-specific variables
IPO capital sold	− 0.01***	− 0.01***	− 0.01***	− 0.02***	− 0.01***	− 0.01***	− 0.01***	− 0.01***
IPO capital sold	[− 9.82]	[− 7.42]	[− 8.25]	[− 4.79]	[− 11.7]	[− 5.24]	[− 8.86]	[− 3.65]
Technology firm	− 0.26***	− 0.24***	− 0.11*			− 0.29***	− 0.29*	− 0.29***
Technology firm	[− 3.99]	[− 3.48]	[− 1.61]			[− 4.06]	[− 1.39]	[− 2.25]
Integer offer price	0.10***	0.10***	0.02***	0.10***	0.10***	0.01***	0.01***	0.01***
Integer offer price	[19.4]	[17.6]	[15.1]	[6.49]	[25.2]	[14.2]	[13.9]	[5.64]
Above range offer price		− 0.02***	− 0.02***	− 0.02***		− 0.02***	− 0.02***	− 0.02***
Above range offer price		[− 5.77]	[− 6.86]	[− 4.23]		[− 4.71]	[− 5.52]	[− 38.9]
Size of offering	0.01	− 0.01	0.01	− 0.01	0.01	0.01	0.01	0.01
Size of offering	[0.30]	[− 0.62]	[0.25]	[− 0.65]	[0.11]	[0.22]	[0.36]	[0.17]
Ratio of institutional participation	− 0.02***	− 0.02***	− 0.02***		− 0.02***	− 0.02***	− 0.02***	− 0.02***
Ratio of institutional participation	[− 2.94]	[− 4.25]	[− 3.11]		[− 5.00]	[− 5.69]	[− 4.37]	[− 8.46]
IPO market-specific variables
Hot IPO market			− 0.12***	0.17**	− 0.094***	− 0.07	− 0.07	− 0.07
Hot IPO market			[− 2.92]	[1.88]	[− 3.31]	[− 0.34]	[− 0.82]	[− 0.96]
Volume of IPO listing	− 0.01***	− 0.01***	− 0.01***	− 0.01***	− 0.01***	− 0.01***	− 0.01***	− 0.01***
Volume of IPO listing	[− 22.0]	[− 19.3]	[− 19.7]	[− 10.6]	[− 23.6]	[− 7.14]	[− 7.50]	[− 7.40]
IPO discount	− 0.012***	− 0.012***	− 0.015***	− 0.014***	− 0.011***	− 0.01***	− 0.01***	− 0.01***
IPO discount	[− 19.7]	[− 20.8]	[− 19.1]	[− 10.1]	[− 27.7]	[− 9.06]	[− 20.5]	[− 4.87]
IPO firm accounting variables
Financial leverage	0.01*	0.01	0.01	− 0.03	0.01	0.01	0.01	0.01
Financial leverage	[1.63]	[0.60]	[1.12]	[− 1.23]	[0.30]	[0.66]	[0.71]	[0.73]
Profitability	0.01*	0.0107*	0.01***	0.01**	0.01	0.01	0.01	0.01***
Profitability	[1.46]	[1.75]	[2.89]	[2.25]	[1.31]	[0.97]	[1.14]	[3.75]
Performance	0.01	0.01***	0.01	0.01***	0.01	0.01	0.01	0.01**
Performance	[0.90]	[4.20]	[0.71]	[2.69]	[1.24]	[1.29]	[1.33]	[1.81]
IPO firm corporate governance variable
Firm corporate governance	− 0.07***	− 0.09***	− 0.10***	− 0.09***	− 0.07***	− 0.07***	− 0.07***	− 0.07***
Firm corporate governance	[− 8.43]	[− 10.1]	[− 11.5]	[− 4.08]	[− 12.4]	[− 3.85]	[− 8.90]	[− 7.09]
Macroeconomic variables
Inflows of foreign direct investment	0.01	0.05***	0.08***	0.02	0.02**	0.01	0.02	0.02
Inflows of foreign direct investment	[0.45]	[3.11]	[5.38]	[0.64]	[1.80]	[0.66]	[1.15]	[0.57]
Interest rate	− 0.01	− 0.01*	0.01	− 0.01	− 0.01**	− 0.01**	− 0.01**	− 0.01
Interest rate	[− 0.36]	[− 1.67]	[0.74]	[− 0.91]	[− 1.72]	[− 1.92]	[− 1.96]	[− 1.02]
Growth of gross domestic product	0.03**	0.05***	0.01	− 0.06*	0.02**	0.01	0.01	0.01
Growth of gross domestic product	[2.47]	[4.33]	[0.38]	[− 1.57]	[1.96]	[0.68]	[1.12]	[0.50]
Inflation rate	0.05***	0.13***	0.09***	0.22***	0.07***	0.06***	0.06***	0.06***
Inflation rate	[4.97]	[9.57]	[4.75]	[4.54]	[7.47]	[3.89]	[6.81]	[2.41]
Legal origin variables
English common law origin	0.13*	− 0.06	− 0.06	− 0.02	0.21***	0.05***	0.05***	0.05***
English common law origin	[1.51]	[− 0.81]	[− 0.58]	[− 1.10]	[3.34]	[3.90]	[9.47]	[3.07]
French civil law origin	0.08***	0.02**	0.06***	0.02	0.06***	0.05***	0.06***	0.05**
French civil law origin	[10.5]	[2.43]	[5.90]	[1.31]	[10.1]	[5.30]	[5.64]	[2.12]
Industry dummy	YES	YES	YES	YES	YES	YES	YES	YES
Year dummy	YES	YES	YES	YES	YES	YES	YES	YES
Country dummy	YES	YES	YES	YES	YES	YES	YES	YES
Constant	− 1.21***	− 2.55***	− 2.22***	− 0.70	− 1.97***	− 3.53***	− 3.53***	− 3.53***
Constant	[− 4.09]	[− 7.51]	[− 6.01]	[− 0.86]	[− 8.81]	[− 15.4]	[− 17.3]	[− 12.9]
Observations	12,522	11,376	11,771	2793	20,902	24,312	24,312	24,312
R squared	0.31	0.40	0.40	0.43	0.32	0.32	0.32	0.32
Number of clusters						24	13	22

Variables	Model 24	Model 25	Model 26	Model 27	Model 28	Model 29
Main variable
Prestigious attorney	− 0.12***	− 0.50***	− 0.14***	− 0.24***	− 0.21***	− 0.189***
Prestigious attorney	[− 4.49]	[− 13.7]	[− 5.25]	[− 6.54]	[− 5.90]	[− 4.80]
IPO firm-specific variables
Reputable underwriters	0.045**
Reputable underwriters	[2.07]
IPO capital sold	− 0.011***	− 0.0078***	− 0.0096***	− 0.013***	− 0.012***	− 0.0119***
IPO capital sold	[− 16.1]	[− 8.68]	[− 15.9]	[− 12.5]	[− 12.6]	[− 11.40]
Technology firm	− 0.33***	0.025	− 0.30***	− 0.37***	− 0.28***	− 0.301***
Technology firm	[− 8.81]	[0.74]	[− 7.55]	[− 7.61]	[− 6.04]	[− 4.44]
Integer offer price	1.12***	0.33***	1.23***	1.09***	1.02***	1.105***
Integer offer price	[35.5]	[12.6]	[35.8]	[23.8]	[25.2]	[15.2]
Above range offer price	− 1.41***	− 0.76***	− 1.45***	− 1.96***	− 1.94***	− 2.143***
Above range offer price	[− 9.11]	[− 8.68]	[− 9.27]	[− 7.20]	[− 7.17]	[− 8.27]
Size of offering	− 0.001	− 0.002***	− 0.001**	− 0.001	0.001	0.001
Size of offering	[− 0.81]	[− 4.69]	[− 2.26]	[− 0.097]	[0.46]	[0.56]
Ratio of institutional participation	− 0.001	0.025	− 0.001**	− 2.17***	− 0.92***	− 1.752***
Ratio of institutional participation	[− 0.88]	[0.74]	[− 2.03]	[− 5.17]	[− 3.95]	[− 4.85]
Ratio of retail participation					− 0.67***
Ratio of retail participation					[− 4.33]
Gross spread					− 0.0031**
Gross spread					[− 2.14]
IPO market-specific variables
Hot IPO market	0.039*	− 0.21***	0.11***	− 0.061**	− 0.065***	− 0.0689***
Hot IPO market	[1.76]	[− 10.4]	[4.59]	[− 2.14]	[− 2.42]	[− 3.95]
Volume of IPO listing	− 0.002***	0.001**	− 0.001***	− 0.0022***	− 0.0021***	− 0.00212***
Volume of IPO listing	[− 29.4]	[2.44]	[− 21.5]	[− 25.8]	[− 26.6]	[− 13.05]
IPO discount	− 0.015***	0.011***	− 0.015***	− 0.011***	− 0.012***	− 0.014***
IPO discount	[− 42.6]	[42.2]	[− 27.5]	[− 26.8]	[− 30.4]	[− 10.4]
IPO regulatory changes						0.0381
IPO regulatory changes						[0.96]
IPO firm accounting variables
Financial leverage	0.001*	0.001*	0.001	0.001	0.001	0.001*
Financial leverage	[1.79]	[1.69]	[0.61]	[0.30]	[0.60]	[1.70]
Profitability	0.001	0.001**	0.001*	0.001	0.001	0.001
Profitability	[0.86]	[1.99]	[1.45]	[1.00]	[1.05]	[1.15]
Performance	− 0.001	0.001	− 0.001	0.001	0.001	0.001
Performance	[− 0.37]	[1.33]	[− 0.51]	[1.22]	[1.31]	[1.21]
IPO firm corporate governance variable
Firm corporate governance	− 0.011***	− 0.001***	− 0.012***	− 0.011***	− 0.010***	− 0.0104***
Firm corporate governance	[− 17.7]	[− 2.75]	[− 20.1]	[− 14.6]	[− 14.7]	[− 15.71]
Macroeconomic variables
Inflows of foreign direct investment	0.042***	0.095***	0.060***	0.017**	0.016**	0.0108
Inflows of foreign direct investment	[6.01]	[13.9]	[7.04]	[1.87]	[2.13]	[1.13]
Interest rate	− 0.016***	− 0.002***	− 0.002	− 0.001***	− 0.01***	− 0.0149***
Interest rate	[− 7.53]	[− 5.23]	[− 0.52]	[− 3.33]	[− 3.86]	[− 4.56]
Growth of gross domestic product	0.015***	0.050***	− 0.12***	0.021***	0.016**	0.00625
Growth of gross domestic product	[2.97]	[10.4]	[− 14.3]	[2.68]	[2.39]	[1.19]
Inflation rate	0.036***	0.054***	0.051***	0.070***	0.059***	0.0649***
Inflation rate	[6.86]	[6.78]	[7.66]	[5.23]	[7.47]	[4.37]
Legal origin variables
English common law origin	0.22***	− 0.14***	0.100	0.63***	0.52***	0.609***
English common law origin	[8.16]	[− 5.59]	[0.35]	[14.1]	[12.9]	[12.9]
French civil law origin	0.17***	0.97***	0.19	0.59***	0.56***	0.774***
French civil law origin	[3.86]	[26.1]	[0.64]	[10.1]	[10.1]	[10.1]
Industry dummy	YES	YES	YES	YES	YES	YES
Year dummy	YES	YES	YES	YES	YES	YES
Country dummy	YES	YES	YES	YES	YES	YES
Constant	− 2.90***	0.47***	− 2.25***	− 3.71***	− 3.59***	− 3.728***
Constant	[− 47.3]	[9.71]	[− 6.44]	[− 42.6]	[− 44.4]	[− 34.41]
Observations	24,312	24,312	24,312	21,225	24,312	24,312
R squared within countries	0.28	0.32	0.42	0.34	0.33	0.32
R squared between countries	N/A	N/A	0.23	N/A	N/A	N/A

Withdrawn IPOs have a value of 1 if the IPO is withdrawn and 0 otherwise. Prestigious attorneys are classified as a binary variable through categorization. If the IPO company's attorney is among the top 100 worldwide registered law firms by market share in the BNID, this variable is one. Otherwise, it is zero. IPO capital sold refers to the percentage of outstanding shares offered by IPO owners at the time of being offered to new investors. Technology firm is a binary variable that equals one if the issuing corporation is categorized as a technology company; otherwise, it equals zero. Integer offer price is a categorical variable, it has a value of one if the offer price of IPO is an integer and a value of zero otherwise. Above range offer price is a categorical variable equal to a value of one if the IPO's offering amount rises above the underwriter's pricing range and zero otherwise. Size of offering is the total amount of payment received by each IPO company, calculated by multiplying the number of stocks offered by the offer price in US dollars. Ratio of institutional participation is the proportion of institutional investors to total IPO participants, which includes both institutional and retail investors. Hot IPO market is a dichotomous variable with a value of one if this IPO is listed in a year during which the total number of listings exceeds the average number of listings; otherwise, it has a value of 0. The volume of IPO listing calculates the current number of IPOs listed in each country and year. IPO discount is the percentage of the offer price to the IPO's first day closing price. Financial leverage is the company's equity-to-liabilities ratio. It shows the company's offering leverage. Profitability is the ratio of the total dividends distributed to shareholders to net income at the time of the offering. Performance is the initial public offering common equity rate of return. Firm corporate governance is the total number of independent directors registered at the time of offering. Inflows of foreign direct investment is a time series index from 1995 to 2019 that shows net investment inflows as a proportion of the GDP. Interest rate covers the period 1995 through to 2019 and interest charges on government borrowing to local and foreign entities, such as long-term mortgages, securities, and other treasury bonds. Growth of gross domestic product is a 1995–2019 time series index that shows GDP per capita growth. The inflation rate tracks yearly consumer price inflation from 1995 to 2019. English common law origin is a categorical variable that equals one if the IPO is offered in an English common law jurisdiction and zero otherwise. Australia, South Africa, the United Kingdom, and the United States are nations that inherited the English common law tradition. French civil law origin is a categorical variable with a value of 1 if the IPO is being issued in a French civil law jurisdiction and 0 otherwise. France, Brazil, Greece, Italy, Mexico, and Russia are among the nations which inherited the civil law tradition. Robust Z-statistics are heteroscedasticity corrected and indicate ***p < 0.01, **p < 0.05, and *p < 0.1. Model 24 controls for the variable reputable underwriter. Model 25 tests the role of reputable attorneys in communicating more with investors to reduce information asymmetry by having the dependent variable disclosure of IPO proceeds and is explained by the employment of prestigious attorneys. Model 26 tests hierarchical structure of the IPO data using PHLM. Model 27 excludes countries with 100 globally registered IPO law firms that have less than 65% of total market share. Model 28 captures differences across countries in the listing process using ratio of institutional participation, ratio of retail participation, and gross spread. Model 29 takes into account 103 potential regulatory changes that have been identified in the IPO market across the sample countries during the period 1995 to 2019 as shown in Table 10.

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