The pricing of U.S. IPOs by seasoned foreign firms

Timothy R. Burch, Larry Fauver

Research output: Contribution to journalArticlepeer-review

2 Scopus citations


We examine the pricing of U.S. initial public offerings (IPOs) by foreign firms that are already seasoned in their domestic countries. Presumably, these equity offers have less downside risk for investors than typical IPOs since domestic share prices can be used to help establish a preoffer value for the firm's equity. In spite of the presumed diminished downside risk, we find that offers by firms from countries that impose foreign ownership restrictions and capital controls are on average underpriced, experiencing an average first-day return in the United States of 12.7%. This result stems in part from the underwriter's failure to price the issue to fully reflect the postoffer premium that often arises for the U.S. shares. In contrast, offers by firms from countries without ownership restrictions have an average first-day return of 0.0%.

Original languageEnglish (US)
Pages (from-to)345-362
Number of pages18
JournalReview of Financial Economics
Issue number4
StatePublished - Jan 1 2003


  • Foreign equity offers
  • IPOs
  • Ownership restrictions

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


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