US-Bound IPOs: Issue Costs and Selective Entry

Abstract

and compare their underwriting fees and indirect costs of underpricing to the IPOs of domestic U.S. issuers. Our results indicate that foreign IPOs experience approximately the same costs on average as domestic IPOs. The risk of foreign IPOs arises from a lack of information and high country risk. The high risk on these dimensions is offset by characteristics of the issuer and issue that reduce risk relative to domestic U.S. IPOs. Foreign U.S. IPO issuers are typically larger firms with tangible assets, listing on the NYSE, that originate from countries sharing a common border and language with the U.S. These issues occur following periods of strong home market equity performance and under stable currency conditions which help to alleviate country risk. To a large extent the findings suggest that “only