IMF-社會動蕩的經(jīng)濟后果：來自首次公開募股的證據(jù)（英）

TheEconomic

ConsequencesofSocial

Unrest

EvidencefromInitialPublicOfferings

PhilipBarrett,ThomasJ.Boulton,TerryD.Nixon

WP/23/232

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theauthor(s)andarepublishedtoelicitcommentsand

toencouragedebate.

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theauthor(s)anddonotnecessarilyrepresenttheviews

oftheIMF,itsExecutiveBoard,orIMFmanagement.

2023

NOV

NAr

ARY

*ResearchfundingwasprovidedbytheJackR.AndersonProfessorship(Boulton).

?2023InternationalMonetaryFund

WP/23/232

IMFWorkingPaper

WesternHemisphereDepartment

TheEconomicConsequencesofSocialUnrest:EvidencefromInitialPublicOfferingsPreparedbyPhilipBarrett,ThomasJ.Boulton,TerryD.Nixon*

AuthorizedfordistributionbyNigelChalk

November2023

IMFWorkingPapersdescriberesearchinprogressbytheauthor(s)andarepublishedtoelicit

commentsandtoencouragedebate.TheviewsexpressedinIMFWorkingPapersarethoseofthe

author(s)anddonotnecessarilyrepresenttheviewsoftheIMF,itsExecutiveBoard,orIMFmanagement.

ABSTRACT:Priorresearchattributesnegativestockmarketperformancefollowingepisodesofsocialunresttoelevateduncertainty.However,socialunrestdoesnotsolelyincreaseuncertainty,butseparatelyactstodecreaseinvestorsentiment.Todeterminewhicheffectdominates,westudyinitialpublicoffering(IPO)underpricing,whichrespondsdifferentlytochangestouncertaintyandinvestorsentiment.Consistentwiththenotionthatsocialunrestdampensinvestorsentiment,wefindrobustevidencethatIPOfirst-dayreturnsarelowerduringtimesofgreatersocialunrest.Limitstoarbitrageintensifythenegativerelationbetweensocialunrestandunderpricing.Notably,stronginstitutionalframeworksmitigatetheimpactofsocialunrestonunderpricing,suggestingthatqualityinstitutionsweakenthelinkbetweeninvestorsentimentandreturns.

JELClassificationNumbers:

G12,G15,G24,G38

Keywords:

Initialpublicofferings;investorsentiment;socialunrest;underpricing

Author’sE-MailAddress:

pbarrett@,

boultotj@,

nixontd@

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1.Introduction

FollowingadeclineduringtheCOVIDpandemic,economic,political,andsocialgrievanceshaveledtoanincreaseinincidentsofsocialunrestinrecentyears.1Figure1illustratesthispoint,plottingthefrequencyofmajorsocialunresteventsidentifiedbyBarrettetal.’s(2022a)monthlyReportedSocialUnrestIndex(RSUI).2Pre-COVID,unrestsurged,peakingwiththebroadwaveofprotestinLatinAmericainlate2019.Andalthoughacombinationoflockdownsanddistasteforpublicgatheringsledtoasharpdeclineinunrestduringthepandemic,unresthasreturnedto

levelssimilartothoseseenin2017and2018.

Whilethegoalofsocialunrestisoftentohighlightandcorrectperceivedsocialinjustices,theeconomicconsequencescanbesevere.Forinstance,Hadzi-Vaskovetal.(2023)findthatsocialunrestisassociatedwithasharpincreaseinacountry’sWorldUncertaintyIndex,aswellasadeclineinconsumerandbusinessconfidence.Thisleadstoadeclineininvestmentandconsumption,whichhasadversemacroeconomicconsequencesincludinga0.2percentagepointdecreaseinGDPforsixquarterscomparedtothepre-unrestlevel.3Dongetal.(2018)usecreditcardtransactiondatatoprovidenovelevidenceconsistentwithaconsumptioneffect.Specifically,theyfindthatfoottrafficandspendingmarkedlydecreaseforstoreslocatednearincidentsofsocial

unrest.

Researchalsolinkssocialunresttostockmarketperformance.Barrettetal.(2022b)findthat

cumulativeabnormalreturnsdecreaseby1.4percentagepointsonaveragefollowingsocialunrest,

1/en/Blogs/Articles/2022/05/20/social-unrest-is-rising-adding-to-risks-for-global-economy

(Accessed:May31,2023).

2Asdiscussedbelow,theRSUImeasuresthefrequencyofarticlesmatchingcertainkeywordsrelatedtounrestinarangeofmediasources.Duetodifferencesincoverage,theleveloftheindexishardtocompareacrosslocations.However,sharpspikesintheindexareverystronglyassociatedwithactualepisodesofsocialunrest.Barrettetal.(2022a)formalizethisnotion,definingsuchspikesconsistentlyacrosslocationstocreatealistofplausiblesocialunrestevents.

3KolliasandTzeremes(2022)arguethattherelationbetweenunrestandeconomicperformanceisbidirectional(i.e.,unrestadverselyaffectseconomicperformanceandeconomichardshippromotesunrest).

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withgreaterimpactforlongerperiodsofunrestandforunrestinemergingmarkets.Tanyerietal.(2022)examinehowunrestaffectedthemajorstockindicesofcountriestouchedbytheArabSpring.Theauthorsfindaverageabnormalreturnsof-1%onkeydates,withEgyptexperiencingthelargestnegativeabnormalreturns(-6%).Klomp(2021)examinestheeffectofunrestonthedefenseindustryduringtheArabSpringandfindsthatdefense-relatedfirmssawshort-termabnormalequityreturnsof5%.Inthelong-term,thissameindustryexhibitsa3%declineinabnormalequityreturns.Theauthorattributesthistoinitialhoardingofmilitaryequipmentfollowedbyaperiodoffearoverinternationalsanctions.Espinosa-Méndez(2022)examinesinvestorreactiontotheviolentriotsthatoccurredin2019inChileandfindsevidenceofreverseherdingbehavior.Namely,inperiodsoffinancialcrisisinvestorsoftenexhibitherdbehavior,but

duringtimesofsocialunrest,theytendtomaketheirowndecisions.

Despitesubstantialevidencethatsocialunrestaffectsmacroeconomicandstockmarketoutcomes,weknowlessaboutitsimpactonindividualfirms.Thisiswhereourmaincontributionlies.Theabovestudiessuggestthatfirmsshouldfinditmoredifficultandcostlytoacquirecapitalduringperiodsofunrest,butempiricalevidenceislacking.Weaddressthisissuebystudyingtherelationbetweensocialunrestandinitialpublicofferings(IPOs).IPOsofferaninterestinglaboratoryforexploringtherelationbetweenunrestandfirm-leveloutcomesbecausetheyallowustodisentangletwokeychannelsthroughwhichsocialunrestmightaffectfirms’capitalraisingefforts.Specifically,lowerinvestorsentimentandincreaseduncertaintyaffectIPOsdifferently.Forinstance,Ljungqvistetal.(2006)suggestthatIPOsareunderpriced,inpart,tocompensateinvestorsforthepossibilitythatsentimentdecreasesbeforetheycanunloadtheirsharesintheaftermarket.Becausestrongersentimentincreasesaftermarketprices,sentimentandunderpricingarepositivelycorrelated(Derrien,2005;Cornellietal.,2006).Additionally,BakerandWurgler

(2007)note“…stocksoflowcapitalization,younger,unprofitable,high-volatility,non-dividend

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paying,growthcompanies…arelikelytobedisproportionatelysensitivetobroadwavesofinvestorsentiment.”(p.130)ThissuggeststhattheinvestorsentimenteffectsarelikelytobesevereforIPOs.Researchershaveconfirmedthepositiverelationbetweeninvestorsentimentandunderpricingusingavarietyofproxiesforsentiment.4Ifsocialunrestlowersinvestorsentiment,

IPOsissuedduringperiodsofsocialunrestshouldexhibitsmallerfirst-dayreturns.

Theorypredictsthatincreaseduncertaintyhastheoppositeeffectonunderpricing.Whenthereareinformationdisparitiesamonginvestors,themoreinformedcanavoidovervaluedIPOs,leavingmoresharesforthelessinformed.Greateruncertaintymakesinformationmorevaluableandcreatesanincentivetoinvestininformationproduction(BeattyandRitter,1986).Thiswidenstheinformationgapamonginvestors,assomehavetheabilityandmeanstogatherinformation,whileothersdonot.Thisexacerbatesthe“winner’scurse”?uninformedinvestorsreceivelarger

allocationsinlessdesirableofferingsandsmallerallocationsinmoredesirableofferings?which

resultsinnegativeaveragereturnsforuninformedinvestorsunlessIPOsaredeliberatelyunderpriced(Rock,1986).Priorresearchusesarangeofindicators,includingfirmandofferingcharacteristics,IPOdisclosures,andaftermarketmeasures,toproxyforexanteuncertainty.5Ifsocialunrestincreasesuncertainty,IPOsissuedduringperiodsofunrestshouldexhibitlargerfirst-

dayreturns.

Ofcourse,socialunrestcouldsimultaneouslydecreaseinvestorsentimentandincreaseuncertainty(Hadzi-Vaskovetal.,2023).Therefore,weaimtodeterminewhicheffectdominates.Inordertodoso,weconstructalargesampleofIPOsissuedin36marketsbetween1998and

2018.UsingBarrettetal.’s(2022a)RSUItomeasuresocialunrestinthemonthandlocationof

4ExamplesincludeBajoandRaimondo(2017)-mediasentiment,Boultonetal.(2020)-consumerconfidence,Chenetal.(2020)-terroristattacks,andMazumderandSaha(2021)-Covid-19pandemicfear.

5ExamplesincludeRitter(1984)-firmage,BoothandSmith(1986)-underwriterquality,BeattyandWelch(1996)

-IPOriskfactorsdisclosure,andRitter(1984)-aftermarketvolatility.

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IPOissuance,wereportrobustevidencethatgreatersocialunrestisassociatedwithlowerfirst-dayreturns.Thissuggeststhattheimpactofsocialunrestoninvestorsentimentoutweighstheeffectithasonuncertainty.Whenwecontrolforattitudestowarduncertainty,wefindevidence

thatunrestexacerbatesIPOoutcomesinamannerconsistentwithourinterpretation.Specifically,

strongeraversiontouncertaintyandambiguitydampensthenegativerelationbetweensocial

unrestandunderpricing.

Weconfirmthenegativerelationbetweensocialunrestandunderpricingina2SLSsettingthataddressesmodelmisspecificationconcerns.Priorresearchonthedeterminantsofsocialunrestmotivateourinstrumentsinthisanalysis.First,Barrettetal.(2022a)findthatunrestincreasesthepotentialforunrestinneighboringcountriesoverthefollowingsixmonthsbyonepercentagepoint.Therefore,weuseneighbors’incidentsofsocialunrestintheprecedingsixmonthstoinstrumentforsocialunrestinthemarketinwhichtheIPOisissued.6RedlandHlatshwayo’s(2021)findingthatprioreconomicconditionsfomentunrestmotivateoursecondinstrument.Namely,weincludethemiseryindex(unemploymentrateplusinflationrate)fortheIPOfirm’seconomy.ConsistentwithBarrettetal.(2022a),wefindthatunresttendstospreadacrossborders.Toughereconomicconditionsalsoexhibitapositiveassociationwithsocialunrest.Moreimportantly,our2SLSresultsconfirmthenegativerelationbetweensocialunrestand

underpricing.

Ourinternationalsettingprovidesseveraladvantagesoverasinglecountrystudy.Forone,wecanexploretheimpactofinstitutionalqualityontherelationbetweensocialunrestand

underpricing.Consistentwithpriorstudiesthatfindthatinstitutionalqualityaffectstherelation

6WefollowBakeretal.(2021)anduselandborderstoidentifyneighbors(source:CIAFactbook).Fortheislandsinoursample,wefollowBakeretal.(2021)andmatchasfollows:Australia-NewZealand,Japan-SouthKorea,Philippines-Malaysia,NewZealand-Australia,andSingapore-Malaysia.

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betweensocialunrestandGDP(Hadzi-Vaskovetal.,2023)andsocialunrestandstockprices(Barrettetal.,2022b),wefindthattheeffectofsocialunrestonunderpricingisalsosensitivetoinstitutionalquality.Specifically,wefindthatthenegativeassociationbetweenunrestandunderpricingisweakerinplacesthatscorebetteralongthefollowingdimensions:controlofcorruption,governmenteffectiveness,politicalstability,regulatoryquality,ruleoflaw,andvoiceandaccountability.LikeSchmeling(2009),whostudiesinvestorsentimentandaggregatestockmarketreturns,weinterpretthisasevidencethathigh-qualityinstitutionsweakentheassociation

betweeninvestorsentimentandIPOreturns.

TotestfurtherourclaimthatsentimentisthekeymechanismlinkingunresttoIPOreturns,westudyindetailacasewheretheeffectshouldbemagnified:whenthereareconstraintstoshort-selling.BakerandWurgler(2006)predictthatshortsaleconstraintsshouldexacerbatetheimpactofawaveofinvestorsentimentonsecuritypricesbylimitingarbitrageurs’abilitytooffsettheeffectsofirrationalinvestors.Consistentwiththeirprediction,theyfindthatshortsellingconstraintsmagnifytheeffectofinvestorsentimentonsecuritymispricing.Boultonetal.(2020)findsimilarresultsforIPOs.Specifically,theyfindthatshortsaleconstraintsstrengthenthepositiveassociationbetweeninvestorsentimentandunderpricing.Whenweexploitdifferencesinshortsaleconstraintsacrossmarkets,whichaffect18-34%ofsampleIPOsdependingonthemeasure,wefindthatthenegativerelationbetweensocialunrestandunderpricingisaggravated

byshortsellingbans,securitylendingbans,andwhenshortsellingisnottypicallypracticed.

Ourresultsimproveourunderstandingoftheeconomicconsequencesofsocialunrestbyhighlightingthecompetingeffects–investorsentimentanduncertainty–ofsocialunrestonfinancialmarkets.Ourevidenceindicatesthat,whenitcomestoIPOunderpricing,socialunrest’snegativeimpactoninvestorsentimenttendstodominateanyincreaseinuncertaintyitmightcause.

BystudyingIPOs,weprovidenovelevidencethat,inadditiontothemacroeconomicandstock

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marketeffectsdocumentedinpriorstudies,socialunrestalsohasconsequencesforyoungfirmsseekingtoraisecapital.ThisissignificantbecausemanyfirmsissueIPOstoraisecapitaltogrow

andimprovethecompetitivenessoftheiroperations(Leoneetal.2007;Borisovetal.2021).

OurstudyalsorelatestotheburgeoningliteraturethatlinksESGcharacteristicstofinancialmarketoutcomes.Socialunrestcanhavenegativeconsequencesforacountry’sESGrating,7whichKinnearandBlanco(2022)suggestcan“…makethemESGinvestmentpariahs,impedingtheinflowsneededtoimproveeconomicperformanceandaddresssocietalneeds.”Atthesametime,socialunrestoffersanopportunityforfirmstosignaltheircommitmenttoESG.8PerhapsthemostcloselyrelatedstudytooursisBakeretal.(2021),whichfindsthatunderpricingislowerforIPOsissuedinmarketswithhigherESGGovernmentRatings.Fangetal.(2018)findsimilarresultsforfirm-levelESG,albeitforseasonedequityofferings.9Weaddtothisliteratureby

directlylinkingsocialunresttoIPOunderpricingthroughitseffectoninvestorsentiment.

Wealsocontributetoagrowingliteraturethatarguesthatinstitutionalqualityhasasubstantialimpactonfirm-levelcapitalmarketoutcomes.EarlystudiesinthisareafindthatIPOunderpricingisassociatedwithindicatorsofaccountingdisclosure(Boultonetal.,2011&2017)andinvestorprotection(Boultonetal.,2010;EngelenandvanEssen,2010).Afewoftherecentpapersinthisarealinkunderpricingtoculturalcharacteristics(Chourouetal.,2018),shortsellingregulations(Boultonetal.,2020),anddemocracy(Duongetal.,2022).Consistentwiththisliterature,wefindthatmarket-levelindicatorsofsocialunrestareassociatedwithfirm-levelIPOunderpricing.

Additionally,weconsidermanyoftheattributesconsideredintheseearlierstudiesandfindthat

7

/insights/analysis/social-and-economic-pressures-undermine-governance-latest-

sovereign-esg-ratings/

(Accessed:May31,2023).

8

/article/bc-finreg-social-unrest-esg-enhance-cred/u-s-social-unrest-presents-opportunities-

for-firms-to-enhance-esg-credentials-bolster-ties-with-other-stakeholders-idUSKBN23C2T8

(Accessed:May31,2023).

9Atthefirm-level,ChenandYang(2020)findthatthereisthepotentialforoverreactioninstockpricestoESGnewsthatisreversedoverthelongterm.

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theassociationbetweensocialunrestandunderpricingissensitivetoinstitutionalquality,cultural

characteristics,andshortsellingregulations.

Thispaperisorganizedasfollows.Section2describesourinternationalIPOsampleandtheempiricalstrategyweusetotesttherelationbetweensocialunrestandunderpricing.Section3modelstheimpactofsocialunrestonunderpricing.Section4reportstheresultsofourempirical

analyses.WesummarizeandconcludeinSection5.

2.Datadescription

2.1.Sampleconstruction

Wegatherdataforordinarycommonstockofferingsissuedbynon-financialfirmsbetween1998and2018fromtheRefinitivSDCPlatinumdatabase.WeusetheSEDOLidentifiertomatchIPOstoDatastream,whichisoursourceofsecondarymarketprices.ForIPOsthatcannotbematchingusingtheSEDOL,weattempttomatchusingthecompanyname,listinglocation,andDatastreamentrydate.WediscardunmatchedIPOsandIPOsthatdonothaveafirstvalidpriceinDatastreamwithinthewindow[-3,+60]relativetotheIPOissuedate.FortheremainingIPOs,

wecalculateunderpricingasfollows:10

Underpricing=(First-dayclosingprice-IPOofferprice)/IPOofferprice(1)ToeliminateextremeobservationsduetoerroneousmatchesbetweenSDCandDatastream,wetrimthetopandbottomonepercentofIPOsbasedonunderpricing.DroppingIPOswithoutthedatarequiredtoconstructkeycovariatesleavesuswithasampleof15,145IPOsissuedin36

markets.Ninehavefourormoreunrestevents.Amongthem,Thailand(7)andTürkiye(6)

10Duetodailyvolatilitylimits,wefollowBoultonetal.(2011)andusethetenthvalidsecondarymarketclosingpricetocalculateunderpricingforIPOsissuedinFrance,Greece,andThailand.InTable10,weshowthatourresultsarerobusttoalternativeinitialreturnmeasures.

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experiencethelargestnumberofunrestincidentsbetween1998and2018.Whilethemajorityofmarketsexperienceatleastoneunresteventduringoursampleperiod,ninedonot(Australia,Canada,Ireland,Japan,NewZealand,Norway,Singapore,SouthKorea,andtheU.S).Oursample

includeskeydevelopedanddevelopingmarkets.

WeuseBarrettetal.’s(2022a)ReportedSocialUnrestIndex(RSUI)totesttherelationbetweensocialunrestandunderpricing.Astheauthorsnote,theRSUIisperhapsthebroadestandtimeliestmeasureofsocialunrestavailable,providingmonthlydatafor130economiesfrom1985through2022.TheindexisconstructedbyidentifyingarticlesinEnglish-languagenewspapersthatcontainkeywordsindicativeofsocialunrest,includingvariationsof“protest,”“riot,”“revolution,”and“unrest.”TheauthorsusethesesearchestoconstructtheRSUI,whichiseffectivelythefractionofallarticlesconsideredthatindicatesocialunrestinaparticulareconomy.11WerebasetheRSUIsothatitaverages100forallsamplemarketsacrossour1998-2018sampleperiodtoensurethatmeaningfulvariationintheindexdrivesourresults.Asarelativelynewmeasure,fewempiricalstudieshaveusedtheRSUI;12however,Barrettetal.(2022a)usecasestudiesofsocialunrestoccurrencesandothercommonmeasuresofsocialunrest

tovalidatetheRSUIandfindthatitaccuratelyandconsistentlycapturesincidentsofsocialunrest.

Theauthorsalsoshowthatalternativemeasureshavemorelimitedcoverage(ArmedConflictLocationEventDataset),lowerfrequency(CrossNationalTimeSeriesDataset),orasensitivity

ofmeasurementthatappearstovaryovertime.

Table1reportsthenumberofIPOs,averageRSUIvalue,andaveragefirst-dayreturnbyIPOmarket.IPOactivityvariesfrom1IPOinArgentinato2,652offeringsintheU.S.Nineteen

marketshadmorethan100IPOsduringoursampleperiod.RSUIistheaveragemonthlyvalue

11Barrettetal.(2022a)includesadetaileddiscussionoftheconstructionoftheRSUI.

12NotableexceptionsincludeBarrettetal.(2022b),Hadzi-Vaskovetal.(2023),andRedlandHlatshwayo(2021).

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acrossallIPOsissuedinamarket.Thisvaluerangesfrom14.90inGreeceto252.79forTürkiye.Thethirdcolumndenotesthenumberofunresteventsduringoursampleperiod.Unresteventsarecommon,asthree-fourthsofmarketsexperienceatleastoneunresteventbetween1998and2018.Thelastcolumnreportsthattheaveragefirst-dayreturnispositiveeverywhereexceptIsrael,whereitisclosetozero.OntheotherendofthespectrumareMainlandChinaandJapan,whichhaveaveragefirst-dayreturnsof62.00%and72.21%,respectively.Overall,oursamplecomparesfavorablywiththoseusedinrecentinternationalIPOunderpricingstudies(e.g.,Boultonetal.,2020).Inrobustnesstests,weconfirmthattheresultsarerobusttoexcludingmarketswithlarge

numbersofIPOs,highRSUIvalues,andthosethatdidnotexperienceunrestevents.

InFigure2,weplottwomeasuresoftheaverageunderpricingvalueforoursamplemarkets,groupingmarketsbythefrequencyofsocialunrestevents.13Althoughthereissomevariationacrosscategoriesandmeasures,thereisaclearassociationbetweengreaterunrestandlowerunderpricing.Thisisconsistentwiththenotionthatsocialunrest’sinfluenceoninvestorsentimentdominatesanyincreaseinuncertaintythatwould,inisolation,resultingreaterunderpricing.However,thisevidenceisonlysuggestive,asitfailstocontrolforotherdeterminantsofunderpricing.Weaddressthisinthefollowingsections,wherewedetailourempiricalstrategy

andreporttheresultsofourmultivariateanalysis.

2.2.Empiricalstrategy

Barrettetal.(2022a)notethatcoverageissuesmaymakeitdifficulttocomparetheRSUIfordifferentlocations.Therefore,webeginourexaminationoftherelationbetweensocialunrestand

underpricingbyutilizingthefollowingbaselinespecificationwithlocationfixedeffects:

13Becausecross-marketdifferencesinthetypicalnumberofreportsofsocialunrestcouldbeduetofeaturesofmediacoverage(suchasbias,culturalconnections,sizeorimportance,etc.)theaverageleveloftheRSUIisnotcomparableacrossmarkets.Indeed,toabstractfromsuchdifference,wenormalizetheindextoaverageto100ineachmarket.

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UndeTPTicingijt=β0+β1log(1+RSUIjt)+βxijt+μi+yj+∝t+εijt,(2)whereUnderpricingijtisthefirst-dayreturnfortheIPOoffirmiissuedinlocationjinmontht;RSUIjtisReportedSocialUnrestIndexforlocationjinmontht;XijtisavectorofcovariatesmeasuredforIPOiissuedinlocationjinmontht;μi,γj,andαtareindustry,location,andissueyeareffects,respectively;and?ijtisthemodel’sresidualterm.Barrettetal.(2022a)showthatlog(RSUI)“isproportionaltoitspercentilerankinbothwithin-andbetween-country

distributions.”(p.23)Therefore,weusethelogtransformationofRSUIinourregressionmodels.

Table2reportsdescriptivestatisticsforthevariablesusedinourbaselinemodel.WereportthenumberofobservationsandaveragevalueforeachvariableseparatelyforIPOsissuedwithinthreemonthsofanincidentofsocialunrest(columns1and2)andallotherIPOs(columns3and4).Inthelasttwocolumns,wereportthedifferencebetweenthetwosubsamplesandthep-valuefromat-testofthedifference.14Wereportdefinitionsandprimarydatasourcesforallvariablesin

theAppendix.

Consistentwiththenotionthatsocialunrestaffectsinvestorsentiment,underpricingisapproximatelyeightpercentagepointslowerforIPOsissuedafterasocialunrestevent(23.3%versus31.4%).Notsurprisingly,theaverageRSUIvalueisoverseventimeshigherforIPOsissuedinthethreemonthsfollowinganunrestevent.NotreportedinthetableisthatRSUIvaluesrangefromzeroto4,055.35(Netherlands,March2017).ThelattervaluecorrespondstoaDutch-Turkishdiplomaticincidentthatsawpro-Turkishdemonstrationsinseveralcities,includingAmsterdam

andRotterdam.15

14TheresultsaresimilarifweconsiderIPOsissuedwithinsixmonthsofanincidentofsocialunrest.

15

https://www.dutchnews.nl/news/2017/03/six-arrested-in-amsterdam-as-police-break-up-pro-turkey-demonstration/

(Accessed:May31,2023).

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PreviousresearchonthedeterminantsofIPOunderpricingmotivatestheothervariablessummarizedinTable2,whichareincludedascovariatesinthemultivariateanalysis.16AburgeoningliteraturefindsthatcharacteristicsoftheeconomyinwhichtheIPOisissuedareassociatedwithunderpricing.Forexample,recentstudiesfindthatunderpricingisassociatedwithdemocracy(Duongetal.,2021),financialmarketintegration(Marcatoetal.,2018),economicfreedom(Boultonetal.,2010),marketcompetition/concentration(Boulton,2022),anddisclosurequality(Boultonetal.,2011&2017).Tocontrolforthesefindings,weincludetheV-DemInstitute’segalitariandemocracyscore,17theKOFSwissEconomicInstitute’sfinancialintegrationmeasure,18theFraserInstitute’seconomicfreedomindex,19theWorldBank’smarketconcentrationinde