Schnyder - Legal Perception and Finance The Case of IPO Firm Value.pdf (582.33 kB)
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Legal perception and finance: The case of IPO firm value

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journal contribution
posted on 10.08.2021, 08:28 authored by Gerhard SchnyderGerhard Schnyder, Anna GrosmanAnna Grosman, Kun FuKun Fu, Mathias Siems, Ruth V. Aguilera
In this paper, we contribute to the literature on institutional determinants of IPO valuation. We introduce the concept of ‘legal signaling,’ which focuses on the perception of the quality of law and thus complements the existing institutional approaches to IPO valuation which consider the quality of the positive law (‘standard view’) and firm-level corporate governance practices (‘firm signaling view’). Our approach explicitly models the difference between the effect of the positive law and the effect of the perception of law on IPO value. Based on a worldwide longitudinal dataset of IPO performance across a large number of countries, we find strong support for the claim that the perception of the quality of law is more important than its actual quality to explain post-IPO firm value. This effect holds regardless of whether the law’s quality is correctly perceived or misperceived. Overall, our findings underscore the need for a more sophisticated theorization of the ways in which law affects entrepreneurial finance.

Funding

Economic and Social Research Council (ESRC) under project number RES-061-25-0518 (Law & Agency project)

History

School

  • Loughborough University London

Published in

British Journal of Management

Volume

33

Issue

1

Pages

88-116

Publisher

Wiley

Version

VoR (Version of Record)

Rights holder

© The authors

Publisher statement

This is an Open Access Article. It is published by Wiley under the Creative Commons Attribution 4.0 Unported Licence (CC BY). Full details of this licence are available at: http://creativecommons.org/licenses/by/4.0/

Acceptance date

13/05/2021

Publication date

2021-06-14

Copyright date

2022

ISSN

1045-3172

eISSN

1467-8551

Language

en

Depositor

Dr Kun Fu. Deposit date: 15 May 2021