Legal Determinants of IPO Activity: Insights from European Stock Markets
Legal Determinants of IPO Activity: Insights from European Stock Markets

Summary/Abstract: Motivation: In evolving economic landscape, the legal framework serve as vital institutional structures that shape both investor confidence, but also the overall attractiveness of capital markets. As companies navigate the complexities of launching initial public offerings (IPOs), the presence of a robust legal environment can either facilitate or hinder their activities. Aim: This research investigates the influence of legal determinants on IPO activity with a particular focus on the difference between foreign and domestic companies. By examining the institutional factors, the study explores the motivations that drive firms to pursue IPOs both in the short- and long-term. Results: The results of panel ARDL model show that an effective legal system that safeguards individual rights positively impacts IPO activity. A less stricter regulatory environment can negatively affect the decisions of domestic companies. Additionally, the regression tree analysis reveals that judicial independence and contract enforcement are the primary factors influencing IPO decisions.

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