The effect of gambling culture on initial public offering underpricing

We examine the effect of gambling culture where an IPO firm is located on its IPO underpricing. Our findings suggest that an IPO firm in a strong gambling culture region, on average, operates more aggressively than one in a weak gambling culture region. Then, we show that such IPOs exhibit lower underpricing than their counterparts. The findings remain qualitatively the same after an array of robustness checks. We interpret the results as indicating that IPO investors consider aggressively operated IPO firms to have good upside potential and are willing to pay higher subscription prices for these IPOs.