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| Do IPO Firms' Paying Overdue Taxes Affect IPO Underpricing？ Based on the Asymmetric Information Theory |
| WEI Zhihua, ZENG Aimin, WU Yuhui, LI Changqing
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School of Economics, Xiamen University;
School of Accounting, Zhejiang Gongshang University;
School of Management, Xiamen University |
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Abstract Using a sample of 1198 Chinese IPO firms, this paper explores the impacts of IPO firms' paying overdue taxes on underpricing and the reasons based on the asymmetry information theory for the first time. The results show that (1) IPO firms paying overdue taxes are associated with higher IPO underpricing, which is 7.8% higher (more than 20 million Yuan less financing on average) than counterpart firm. (2) Testing on three types of asymmetry information theory, i.e., the signal theory, the “winner's Curse” theory and the principal-agent theory, we find that only the principal-agent theory helps partially explain the positive correlation between IPO firms' paying overdue taxes and IPO underpricing. The reason is that these firms have weaker motivation of supervision on underwriters, rather than lack of effective incentives compensation for underwriters. Further study finds that the positive association between IPO firms' paying overdue taxes and IPO underpricing are more prominent in the issuers employing low-reputation underwriters and information environment with less transparency (i.e., small and medium enterprises board and growth enterprise market board, the region with stronger tax enforcement).
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Received: 25 April 2017
Published: 01 January 1900
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