Download or read book The Economic Consequences of Social Unrest: Evidence from Initial Public Offerings written by Mr. Philip Barrett and published by International Monetary Fund. This book was released on 2023-11-10 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: Prior research attributes negative stock market performance following episodes of social unrest to elevated uncertainty. However, social unrest does not solely increase uncertainty, but separately acts to decrease investor sentiment. To determine which effect dominates, we study initial public offering (IPO) underpricing, which responds differently to changes to uncertainty and investor sentiment. Consistent with the notion that social unrest dampens investor sentiment, we find robust evidence that IPO first-day returns are lower during times of greater social unrest. Limits to arbitrage intensify the negative relation between social unrest and underpricing. Notably, strong institutional frameworks mitigate the impact of social unrest on underpricing, suggesting that quality institutions weaken the link between investor sentiment and returns.