The Impact of Reputable Law Firms on IPO Underpricing in Developing Countries

The purpose of this research is to evaluate the effect of issuing businesses engaging reputed law firms on the extent of underpricing in developing IPO markets. The consequences of the involvement of prestigious lawyers in underpricing IPO businesses are lacking from a global viewpoint due to a lack of research. This research provides the first empirical investigation of the role of reputable law firms in the underpricing of IPO firms in developing IPO markets. Thus, it expands on Moran and Pandes’s work, which was previously constrained to the US IPO market. We analyze a large dataset of 6,869 newly and publicly traded firms in 10 developing markets between January 1995 and December 2019. We discover that IPO issuers do certainly benefit from engaging reputed attorneys to verify their quality in order to alleviate investors’ ex-ante uncertainty and protect their offers from being significantly underpriced. Our findings have ramifications for IPO founders, investors, academics, and policymakers.