The intersection of supply chain operations and finance: Logistics uncertainty and International IPO underpricing

We study the link between country-level indicators of logistics performance and initial public offering (IPO) outcomes. Consistent with the hypothesis that logistics performance is negatively correlated with uncertainty and information asymmetry, we find that returns measured from the IPO offer price to the first-day market close (i.e., underpricing) are lower for IPOs issued in countries with higher Logistics Performance Index (LPI) scores. Moreover, we find that country and firm characteristics associated with less severe uncertainty and information asymmetry concerns weaken the negative impact of logistics performance on IPO underpricing. The association between logistics performance and underpricing is stronger for industries that are more dependent on the logistics infrastructure and during the Global Financial Crisis. Our findings highlight how operational and valuation uncertainty brought on by a country’s logistics infrastructure affects the cost of capital for growth-oriented ventures seeking capital to increase competitiveness.