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We find a negative relation between democracy and initial public offering (IPO) underpricing for a sample of 23,050 IPOs across 45 countries. The effect of democracy on underpricing is weaker for IPOs audited by Big 4 auditing firms, backed by venture capital firms, and with better disclosure specificity of use of proceeds. Democracy exerts a larger influence on underpricing for firms with higher agency problems, in countries with weaker institutional quality or shareholder protection, and during periods of high investor sentiment or economic policy uncertainty. Overall, our results highlight the importance of democracy in reducing IPO underpricing around the world.

We investigate the influence of public companies on their local economies through the spending of their employees on local goods and services. Using the taxicab industry in New York City as a laboratory, we find that tips paid for taxis taken near firms’ headquarters are higher on the days their stock returns are higher. This finding is stronger for firms offering greater stock-based compensation, and tipping also increases following the initial public offerings (IPOs) of firms particularly at the end of the IPO lock-up period. Idiosyncratic stock returns are more strongly associated with tipping than are aggregate stock market returns, suggesting that the increase in tipping with stock returns is due to firm-level factors. The number of taxis taken near firms’ headquarters, too, increases with their stock returns. Additional tests suggest that these findings are non-spurious.

We investigate the effect of the “7% solution”—the fact that underwriters in the U.S. charge a 7% spread to most IPOs between $20 million and $100 million in size—on the ensuing pricing of the offerings. Our identification exploits the variation in spreads that is due to distinct kinks in the relation between spread and offer size at these two thresholds. We find that the spread positively influences underpricing but also the offer-price adjustment from the filing range’s midpoint. Our evidence indicates that the spread influences the aftermarket price, suggesting that underwriters can shape, not merely discover, investor valuations.

The larger underpricing (15 percent) in the early years following the inauguration of Borsa Istanbul indicates the importance of investors, intermediaries, and firm insiders learning about the trading and pricing of firms in organized stock markets. The underpricing in recent years (from 2010 to 2020) averages 5 percent. Micro-level uncertainties about the firm as evidenced by the smaller underpricing in IPOs marketed using fixed offer prices, and the IPOs where underwriters signed on for firm commitment also prove important. Underpricing also proves smaller in larger IPO firms. © 2021 The Authors

Using a unique dataset of loan information disclosed in Chinese firms' initial public offering (IPO) prospectuses, we investigate how prior banking relationships affect the long-term performance of IPOs. The findings suggest that when an IPO firm has a pre-IPO relationship with a bank that includes larger loans or greater loan spreads, its long-term performance is higher. Specifically, we find a 1% increase in the average loan-to-asset ratio (average loan spread) will result in a 1.32% (10.22%) increase in the three-year post-IPO stock return. Additional analysis suggests that firms with higher average loan-to-asset ratios and loan spreads have, on average, higher combined three-years post-IPO asset growth, debt growth, sales growth, and net income growth. Collectively, we show that a bank's knowledge of loan information as a result of a banking relationship that existed prior to the IPO has a material impact on the performance of new firms, which is consistent with the interpretation that bank monitoring has a positive role in firm value.

Using newly available data on initial prices, this study is the first to analyze the price-updating process associated with corporate bond (CB) offerings. Similar to the case for equity IPOs, the evidence shows bookbuilding theories help explain the CB offering price. In particular, CB price updates reduce underwriters’ pricing errors. The partial adjustment phenomenon exists, and underwriters propose a lower initial price in cases of greater uncertainty. However, the CB price update has a large mean value and is smaller for lower-rated offerings, indicating part of the CB price update is unrelated to investors’ information production.

This study investigates the cycles that IPO issuance produce in Pakistan and the US. We did not find evidence of a lead-lag relationship between IPO volume and initial returns in Pakistan; however, this evidence holds for the US IPOs. Another important finding is that Pakistani and US IPOs are sensitive to changes in market conditions. Moreover, we report evidence of emerging hot markets in Pakistan. This study compares the results of hot IPO markets to the proceeds obtained for firms that issue their shares and finds that firms raise more capital during hot markets; however, factors like regulatory regimes have different influences over the proceeds raised across the different markets.

In this paper, we find that the conflict of interest between loan holders and bondholders is positively related to bond IPO underpricing, which serves as a compensation to the initial bond investors. We construct four proxies for the conflict between loan holders and bondholders, namely, a loan covenants index, the outstanding loan amount, the number of lead banks, and the loan remaining maturity. Our empirical tests show that all four variables are positively related to bond IPO underpricing, indicating that the loan structure of firms has a real impact on the pricing of their bond IPOs.

We argue that the pervasive practice of evaluating portfolio managers relative to a benchmark has real effects. Benchmarking generates additional, inelastic demand for assets inside the benchmark. This leads to a “benchmark inclusion subsidy:” a firm inside the benchmark values an investment project more than the one outside. The same wedge arises for valuing M&A, spinoffs, and IPOs. This overturns the proposition that an investment’s value is independent of the entity considering it. We describe the characteristics that determine the subsidy, quantify its size (which could be large), and identify empirical work supporting our model’s predictions.

Using a unique dataset, we examine financial performance, arid venture capital involvement in 167 MBOs exiting through IPOs (MBO-IPOs) on the London Stock Exchange, during the period 1964 -1997. VC backed MBOs seem to be more underpriced than MBOs without venture capital backing, based on average value-weighted returns. MBOs backed by highly reputable VCs tend to be older companies, and exit earlier than MBOs backed by less reputable VCs. The results contradict 'certification' and 'grandstanding' hypotheses supported by US data (Meggirison arid Weiss, 1991; arid Gompers, 1996, respectively). We found no evidence of either significant underperformance, or that VC backed MBOs perform better than their non-VC backed counterparts in the long run. However, MBOs backed by highly reputable venture capital firms seem to be better long-term investments as compared to those backed by less prestigious venture capitalist firms. The results remain robust after using different methods to measure performance, and after controlling for sample selectivity bias. © Blackwell Publishing Ltd. 2005.

This paper investigates the importance of accessing public capital markets through an initial public offering (IPO), and the consequent relaxation of firms’ financial constraints, for firm-level long term employment decisions. We find that firms significantly increase post-IPO investment in human capital compared to the pre-IPO stage. To address endogeneity concerns, we use a novel dataset of private firms and compare employment growth of IPO firms with two different control groups: First, private firms that file for an IPO but eventually withdraw their offering due to exogenous market conditions, and second, a propensity score matched sample of private firms that never file for an IPO. Firms that complete the IPO process experience higher employment growth in the post-IPO period relative to each control group. Importantly, our results show that the most likely channel for the realization of higher employment growth is the relaxation of financial constraints, allowing the newly public firms to access both equity and debt markets for funding investment in human capital, and not only capital expansion. Overall, our results highlight the importance of public capital markets for job creation over long term horizons. JEL Classification: G32, G34.

This study examines the impact of credit ratings on Initial Public Offerings (IPOs) for a sample of 336 U.S. banks. We report novel evidence in relation to the framework of An and Chan (2008) and Goergen et al. (2021). First, our empirical findings document that top management's decision of U.S. banks through to seek CRA evaluations turns out to be visible to potential IPO investors and contributes to a successful first trading day. Second, we confirm the relation between the existence of any credit rating (acquired from the three major U.S. agencies) and underpricing. Third, multiple credit ratings lead to lower underpricing than in the case of a single rating. Multiple credit ratings also contribute to reducing the filing price revisions. Finally, we report that in all cases, the credit rating that a rated U.S. bank IPO received after the completion of the public offering was higher than the last one received before the IPO.

This paper investigates abnormal standardized returns (ASRs) after major corporate events. Dutta, Knif, Kolari, and Pynnonen (2018) have shown that the ASR t-test has superior size and power compared to traditional test statistics. Based on this new test statistic compared to traditional test methods, we re-examine long-run abnormal returns after mergers and acquisitions, initial public offerings, seasoned equity offerings, dividend initiations, stock repurchases, stock splits, and reverse stock splits. While some recent studies report disappearing long-run event effects over time, our ASR tests in different subperiods from 1980 to 2015 detect significant long-run abnormal returns after these corporate actions. Graphical analyses of ASRs further support our statistical test results. We conclude that long-run abnormal returns persist after major corporate events.

We investigate the effects of venture capital ownership on the demand for auditor reputation, the supply of assurance services, and the quality of financial reporting in the market for new issues. Extensive research exists on the relation between auditing and ownership, however, limited research exists on the relation between auditing and venture capital ownership, a form of ownership characterized as activist and that goes beyond the simple provision of capital. We find that venture capital ownership increases the demand for auditor reputation and that auditors provide a higher level of assurance service to a venture-capital-backed IPO. We also find that the presence of a venture capitalist is associated with lower financial reporting quality, however, this effect is largely offset when a high reputation auditor is also on the IPO. Our evidence is consistent with the argument that venture capitalists on the IPO influence the choice and the extent of auditing to communicate information to investors in a manner that maximizes venture capitalists’ returns for their portfolio fund.

Using more than 50,000 firm-years from 1988 to 2015, we show that the empirical relation between a firm's Tobin's q and managerial ownership is systematically negative. When we restrict our sample to larger firms, as in the prior literature, we confirm earlier findings of an increasing and concave relation between q and managerial ownership. We show that cumulative past performance and liquidity can explain these seemingly contradictory results. Better performing firms have more liquid equity, which enables firms and insiders to more easily sell shares after the IPO, and they also have a higher Tobin's q.

The stock market should fund promising new firms, thereby breeding competition, innovation, and economic growth. However, using three decades of data from 47 countries, we show that concentrated stock markets dominated by a small number of very successful firms are associated with less efficient capital allocation, sluggish initial public offering and innovation activity, and slower economic growth. These findings are robust to alternative sample periods, econometric specifications, and competing explanatory variables. Our evidence is consistent with the paradox that the capital market of a competitive economy can impede the continuing competitiveness of that economy.

This study investigates the impact of local corruption on IPO underpricing. We find that compared to firms located in regions with low corruption, firms located in regions with high corruption exhibit higher IPO underpricing. In cross-sectional analysis, we find that high-reputation underwriters and auditors can attenuate the positive relationship between local corruption and IPO underpricing. In addition, we find that the positive relationship between local corruption and IPO underpricing is confined to non-state owned firms. Our study contributes to the literature on the consequences of corruption and the determinants of IPO underpricing.

The psychology literature indicates that the quality of decisions declines after previous decision-making exerts mental resources, which is known as decision fatigue. Using comprehensive detailed bidding data for 783 IPOs in China, we study whether decision fatigue affects institutions’ bidding behavior. The institutions in our sample often bid in several IPOs in a single day. We find that institutions’ bid accuracy declines over the number of previous pricing decisions the institution has already made in a single day, which is less pronounced in funds and brokerage firms. Additionally, consistent with decision fatigue, we find that as the number of previous pricing decisions an institution makes increases, the institution submits more bids at heuristically rounded prices, submits conservative bids with lower prices and fewer shares, and obtains fewer allocations and lower profits. The results remain robust after controlling for unobserved institution-underwriter relationships. Consequently, the elasticity of IPOs with a higher level of decision fatigue is lower.

The initial public offerings (IPOs) of Uber and Lyft in 2019 marked a milestone for the decade-old ridesourcing. As we start to embrace ridesourcing in our daily life, we also rearrange our daily travel amongst different modes of transportation. As the fundamental decisions in travel behavior, car ownership and car travel should be re-examined in the advent of shared mobility. In this paper, we applied a vehicle choice model that factors in ridesourcing frequency to understand the decisions about (1) how many cars an individual would declare as the primary driver of, and (2) the annual vehicle miles traveled (VMT) for all cars he or she drive. We used a subsample of the latest 2017 National Household Travel Survey (NHTS) data that focus on the Capital region (Washington, D.C. – Maryland – Virginia) as our study area. We applied a weighted regression analysis following the NHTS survey design and derived population-representative results on both decisions. In addition, we calculated the driving cost for each household vehicle based on the latest fuel economy data and incorporated driving cost into the car travel model. The results suggest that ridesourcing is associated with a smaller chance of an individual being the primary driver of a car. However, the elasticity indicates that ridesourcing usage has a small impact on the number of primarily driven cars. Furthermore, ridesourcing has no significant impact on the annual VMT, either. Driving cost, on the other hand, still plays the key role in determining driving distances.

Since the early 1980s, the composition of US public firms has progressively shifted toward less profitable firms with high growth potential (Fama and French, 2004). We estimate a dynamic corporate finance model to quantify the role of this selection mechanism for the secular trend in cash holdings among US public firms. We find that an increase in the precautionary savings motive—primarily driven by the decline in initial profitability among R&D-intensive new lists—explains about 50% of the upward trend in cash holdings. This selection mechanism also explains part of the upward trend in sales growth volatility.

We examine the R&D intensity of IPO firms and the effects of tenure, CEO ownership, and CEO duality – the practice of a single individual serving as both CEO and chair of board, on R&D expenditure in an emerging market (Taiwan). We argue that high-tech IPOs defer R&D expenditure from pre-issuance period to post-issuance period and that non-tech IPOs reduce their R&D expenditure before issuance. High-tech IPOs with CEO duality or longer tenure aggressively invest in R&D during the early aftermarket period. IPO lock-up hinders CEOs’ diversification of personal wealth from stock and leads to a negative relation between R&D intensity and CEO ownership. CEO characteristics reinforce R&D intensity of high-tech IPOs during the early aftermarket.

This study aimed to investigate the effect of institutional ownership on initial public offering (IPO) valuation and also to examine the indirect role played by the pricing mechanism on the relationship. Cross-sectional multiple regression was used to analyse the relationship between institutional ownership and IPO valuation based on the sample of 450 IPOs listed on Bursa Malaysia between January 2000 and December 2018. The results show that institutional ownership had a positive association with IPO valuation. The signalling role of institutional investors attempted to convey information on firms' qualities which in turn had approximately fair IPO valuations. Further, this study found that book-built IPOs with higher institutional ownership were priced more closely to the firms' intrinsic values. The results have implications for underwriters and issuers in signalling firms’ qualities through incorporating book-building in IPOs and allocating a higher number of shares to institutional investors.

The aim of this study is to examine the relationship between public ownership (public float), share warrants and the market performance of IPOs on the Indonesia Stock Exchange (IDX). The public ownership is measured as the percentage of shares held by the public after the IPO, share warrants are measured as dummy variables, and market performance is measured by both initial returns and 36 months cumulative abnormal returns. The test is conducted by OLS and Quantile Regression to find out whether the percentage of shares held by the public after the IPOs and warrants offering have relationships with both the initial and the long-term shares market performance. The sample consists of 124 IPOs companies during 2009-2014. OLS shows not only that public float and warrant offerings are related to initial returns, but also warrants mediate the relationships between public float and initial performance. The analysis with quantile regression shows that the positive relationship between public float and short-term market performance occurs in the IPO with middle-level initial returns (i.e. between 40th to 60th quantiles). The effect of warrant offerings on initial returns simply does not appear on the lower quantiles (10th through 30th quantiles). We find no relationships between public float and warrant offerings with the long-term market performance, which gives an indication that warrant offerings in Indonesia are a form of staged financing policy.

We study informational freeriding in a model where agents privately acquire information and then decide when to reveal it by taking an action. Examples of such freeriding are prevalent in financial markets, e.g., the timing of initial public offerings, analysts’ forecasts, and mutual funds’ investment decisions. The main results show that, in large populations, few agents provide significant information while the vast majority of agents freeride. We highlight the role of uncertainty and market size in shaping the dynamics of price discovery. Among other results, we find that heightened uncertainty over the underlying state enhances information production, yet weakens the precision and speed of information aggregation in the market.

This study analyzes the impact of venture capital (VC)-backed IPO firms’ patent growth during the period of VC investment on the long-run performance of stock returns, using data on the China A-share market between 2003 and 2013. The baseline results indicate that VC-backed firms that have generated successful patent filings during the investment period of VCs exhibit superior post-IPO performance compared to other VC-backed firms and non-VC-backed firms in the long run. These results continue to hold under several robustness checks. Overall, we provide a clear, crucial mechanism showing that venture capital improves the long-run performance of IPOs by increasing the number of granted patents of portfolio firms; that is, technological innovation is the major contributing factor to the long-run performance of VC-backed IPOs.

This paper explores the creation and evolution of new stock exchanges around the world geared toward entrepreneurial companies, known as second-tier exchanges. Using hand-collected novel data, we show the proliferation of these exchanges in many countries, their significant volume of Initial Public Offerings (IPOs), and lower listing requirements. Shareholder protection strongly predicted exchange success, even in countries with high levels of venture capital activity, patenting, and financial market development. Better shareholder protection allowed younger, less-profitable, but faster-growing, companies to raise more capital. These results highlight the importance of institutions in enabling the provision of entrepreneurial capital to young companies.

Prior research shows that failures to deliver, which commonly occur around initial public offerings (IPOs), typically result from underwriter price stabilization. Additionally, investors often establish short positions in IPO stocks that are unrelated to underwriter price stabilization. We study the relation between failures to deliver, short sales, and IPO trading costs. We find that failures to deliver are associated with greater liquidity, especially for IPOs likely to receive underwriter price support. However, contrary to prior research that finds that short selling is associated with greater liquidity, we find that short selling is negatively correlated with liquidity for IPO stocks with strong investor demand.

We examine the underpricing of 2,131 Chinese initial public offerings (IPOs) between 2005 and 2017. The results indicate that state-owned enterprises (SOEs) controlled by the local government (local SOEs) offer significantly higher underpricing when they go public than SOEs controlled by the central government and non-SOEs do. This phenomenon is evident for local SOEs from less developed provinces, after controlling for the direct effect of regional economic performance. These results suggest local government officials underprice initial public offerings to make regional companies successfully go public to promote the regional economy.

Although initial public offering (IPO) survival is a well-studied phenomenon, the combinations of organizational orientations and strategic emphases that lower the odds of IPO failure (i.e., delisting within five years from IPO) remain less studied. Due to the resource-intensive nature of these orientations and the limits of managerial attention, committing to an orientation and a conducive strategic emphasis may be important to IPO survival. We ask whether post-IPO firms relying on market orientation (MO) and strategic emphasis on advertising have higher odds of survival than those relying on entrepreneurial orientation (EO) and strategic emphasis on research and development (R&D). In a sample of U.S. IPOs, we find that MO significantly improves the odds of IPO survival and greater strategic emphasis on value appropriation (advertising) further improves the odds of IPO survival. However, greater strategic emphasis on value creation (R&D) and EO have no influence on IPO survival.

The issuer underpricing hypothesis addresses why IPOs with a Directed Share Program (DSP) are substantially more underpriced and why the issuers are not upset over the additional money left on the table. In support of the hypothesis, we find that both the final size and likelihood of DSP adoption are greater when expected IPO underpricing is high. Issuers with a DSP also strategically underprice their IPO through a downward bias in offer price adjustments, but will do so only when the cost is not prohibitive. Finally, the first-day IPO return is relatively higher when directed shares are allocated to customers.

This paper conjectures that, just as SEO (seasoned equity offering) firms are likely to face fewer information asymmetry problems relative to IPO firms, the same applies to SECO relative to initial ECF (equity crowdfunding) campaign firms. This is mainly due to new information at a SECO - such as pre-money valuation gains – that reduces adverse selection problems. Using a sample of 709 UK ECF firms conducting a first SECO campaign over the 2011–2018 period, the probit results suggest that annualised valuation gains between the initial and SECO campaigns increases the probability of having a successful first SECO campaign but the equity offered lowers this probability. First SECO success is also related to different platform shareholder structures. The results show that the nominee model and coinvestment model dominate the direct model in terms of the probability of conducting a successful first SECO campaign. This is likely linked to reduced adverse selection and moral hazard problems stemming from no separation between ownership and control and enhanced due diligence and monitoring capabilities.

Within the Private Equity (PE) market, the event of a private company undertaking an Initial Public Offering (IPO) is usually a very high-return one for the investors in the company. For this reason, an effective predictive model for the IPO event is considered as a valuable tool in the PE market, an endeavor in which publicly available quantitative information is generally scarce. In this paper, we describe a data-analytic procedure for predicting the probability with which a company will go public in a given forward period of time. The proposed method is based on the interplay of a neural network (NN) model for estimating the overall event probability, and Survival Analysis (SA) for further modeling the probability of the IPO event in any given interval of time. The proposed neuro-survival model is tuned and tested across nine industrial sectors using real data from the Thomson Reuters Eikon PE database.

To fill the equity gap, several international bodies suggest developing stepping-stone markets. These stock markets aim to nurture the most profitable emerging firms until they get large enough to move to the main markets. This paper investigates the extent that a stepping-stone market can indeed feed a main board with good quality firms. We analyze 209 graduations from the Canadian stepping-stone market benchmarked with 191 initial public offerings (IPOs) on the main Canadian board from 1997 to 2015. Three years before entering the main board, future graduates are significantly less mature than future IPO firms, but ultimately there are as many graduations as IPOs on the main board. There is no significant difference between the quality of graduates and IPOs: investors similarly appraise both categories of firms, which exhibit similar post-listing long-run performance. In Canada, the stepping-stone market thus seems a valuable financing strategy for growth-oriented ventures, apparently fulfilling its role of fostering the development of innovative firms and feeding the senior market.

Participation in online brand communities (OBCs) is critical for the success of the community and the owner firm. Author attempts to explore this core OBC activity on the premises of psychological ownership theory by modeling participation intentions as a function of the members' sense of individual psychological ownership (IPO) and collective psychological ownership (CPO) experienced in the community. Data collected through online surveys from 763 members of the firm created OBCs and analyzed through structural equation modeling (SEM) revealed that IPO and CPO sensed by the members positively influence their participation intentions, that further influences members' brand purchase intentions and positive word of mouth (WOM) about the community. The multi-group SEM analysis reveals interesting differences in the structural paths as observed for ‘active members’ and ‘lurkers’ group, supporting the moderating role of member type. The study contributes to the existing theory as well as practices on members' participation in OBCs.

This paper examines whether the degree of heterogeneity of investors' beliefs is sensitive to reported earnings and “anchor” institutional investment in initial public offerings (IPOs). Evidence from a quasi-experimental setting — an IPO market with anchor investments, and an IPO market without anchor investments — reveals that heterogeneity of investors' beliefs associated with above-market-average earnings yields (EYs) is lower in anchor-backed IPOs than in non-anchor-backed IPOs. The findings, which are robust to endogeneity concerns, suggest that transparent anchor investment ahead of public filing lowers heterogeneity of investors' beliefs and thereby improves financial reporting efficiency, or the timeliness of price discovery from accounting information, independent of accounting standards and financial reporting quality.

Underpricing of Initial Public Offerings (IPOs) is one of the most widely studied anomalies in the literature on financial economics. This paper examines the short-run IPO performance in an emerging market by using the data of 148 IPOs listed on the Colombo Stock Exchange (CSE) from 1991 to 2017. We found that IPOs on average were underpriced by 47% and that 32 IPOs were overpriced by approximately 17%–18%. The stepwise multiple regression results showed that offer risk, investor sentiment, firm size, market volatility prior to the IPOs, the time lag between IPO issue date and CSE listing date, and hot-issue periods have a significant relationship with IPO returns. The outcomes are hence consistent with the prediction of ex-ante uncertainty, windows of opportunity and the investor sentiment hypotheses. Overall, the results indicate that in Sri Lanka, underpricing accounts for a greater percentage of the IPOs than overpricing.

Partial adjustment of book-building IPOs is to compensate bidders for their revealing positive information and is well documented in the U.S. pure book-building IPOs. We find that partial adjustment does not exist in Taiwanese hybrid dual-tranche book-building with a clawback provision and a pre-IPO market. In Taiwanese book-building, underwriters collect demand information during the pre-marketing period to set a price range and collect retail subscribers’ interests during the pre-selling period and trading information in the pre-IPO market to set a final offer price. The dual-tranche with a clawback provision hinders bidders from divulging positive information during the pre-selling period. Attracting retail subscription in the dual-tranche hybrid book-building process hurts underwriters’ information acquisition from the bidders. Underwriters set the final offer price based on the free information of retail subscription and the trading information in the pre-IPO market rather than bidders’ private information.

We construct size and value factors in China. The size factor excludes the smallest 30% of firms, which are companies valued significantly as potential shells in reverse mergers that circumvent tight IPO constraints. The value factor is based on the earnings-price ratio, which subsumes the book-to-market ratio in capturing all Chinese value effects. Our three-factor model strongly dominates a model formed by just replicating the Fama and French (1993) procedure in China. Unlike that model, which leaves a 17% annual alpha on the earnings-price factor, our model explains most reported Chinese anomalies, including profitability and volatility anomalies.

We investigate how director networks impact IPO characteristics and find that firms with better-connected directors have higher IPO market valuation, more positive offer price revisions, higher first-day returns, more pre-IPO media coverage, and superior post-IPO stock performance. Director networks are beneficial to the share offering because corporate directors help facilitate information exchange with prospective investors, attract their attention to the IPO, and maintain and grow their interest after the IPO.

Measuring the value of labor-market hires for stock prices, be it underwriters when firms go public (IPOs) or chief executive officers (CEOs), is difficult due to selection. Opaque firms with higher costs of capital benefit more from prestigious underwriters, while productive firms benefit more from talented CEOs. Using assignment models, we show that the importance of talent (or agent heterogeneity) relative to selection (or firm heterogeneity) is measured by wage increases across agents of different compensation ranks divided by changes in output across their firms. The median of this ratio is 0.5% for underwriters and 2% for CEOs.

Significant policy changes were made in 2009 and 2014 with regard to the initial public offering (IPO) market in China, giving us an opportunity to examine the regulatory impact on the IPO market and CEO effects on IPO pricing under the different policies. After a policy of “window guidance” on IPO pricing was abolished in 2009, CEO attributes (e.g., political connections) played a significant role in revising the initial price to derive the offering price (i.e., the final price before going public) but no role in the short-term returns of the IPO post listing. The high offering prices set by CEOs likely explain the CEO effects on differential pricing. After the “window guidance” policy, with restrictive IPO pricing, was re-imposed in 2014 to correct over-pricing, which leads to the collapse of the IPO market. CEOs attributes have no effect on price revision but significantly affect IPO's short-term returns after listing, implying that this policy is too restrictive and triggers severe IPO underpricing.

Using data on the entire population of businesses registered in the states of California and Massachusetts between 1995 and 2011, we decompose the well-established gender gap in entrepreneurship. We show that female-led ventures are 63 percentage points less likely than male-led ventures to obtain external funding (i.e., venture capital). The most significant portion of the gap (65 percent) stems from gender differences in initial startup orientation, with women being less likely to found ventures that signal growth potential to external investors. However, the residual gap is as much as 35 percent and much of this disparity likely reflects investors’ gendered preferences. Consistent with theories of statistical discrimination, the residual gap diminishes significantly when stronger signals of growth are available to investors for comparable female- and male-led ventures or when focal investors appear to be more sophisticated. Finally, conditional on the reception of external funds (i.e., venture capital), women and men are equally likely to achieve exit outcomes, through IPOs or acquisitions.

Human capital is a key component of the resource base of the firm, particularly in high-tech entrepreneurial firms. In the initial public offering (IPO) context, the IPO firm sometimes identifies individual key employees because the IPO firm is dependent on the services of those employees. However, research is limited on determining the impact of such employee dependence on firm IPO performance. Using a sample of U.S. high-tech firms, we show that the IPO firm's performance is lower when the IPO prospectus discloses such dependence. Among firms with such disclosures, long-tenured executives increase IPO performance. In addition, the effects of long-tenured executives are stronger when multiple key employees are identified in the IPO firm.

We examine the anchoring effect of underwriters' proposed price ranges on institutional investors' bid prices during IPO auctions. We find that the distribution of investor bid prices exhibits sharp spikes around both endpoints (the reference points) of underwriters' proposed price ranges and that investor bid prices increase with the disparity between the reference points and the expected IPO offer price. Our findings are robust to a battery of checks. In addition, the final IPO offer price is positively and the aftermarket performance is negatively associated with the disparity, respectively. Our findings suggest that institutional investors anchor on underwriters' proposed price ranges when bidding in IPO auctions and this anchoring effect has wealth effect on IPO pricing.

This paper analyzes the relationship between pre-IPO growth and the post-IPO long-run performance for venture capital (VC)-backed firms. Our results show that the effect of pre-IPO growth on post-IPO long-run performance is positive, but is attenuated by venture capital in a matched sample. Focusing on VC-backed IPO firms, we find an inverted-U relationship between pre-IPO growth and post-IPO long-run performance. In addition, our baseline results continue to hold in a variety of settings, including post-IPO profitability performance and ownership divisions of venture capital. We explore one underlying interpretation through which post-IPO long-run performance exhibits a reversal when pre-IPO growth increases to a saturation point: VC-backed firms tend to engage in accounting fraud due to the incentives from some opportunistic VCs to take firms public earlier.

An increasing number of foreign firms are seeking capital in foreign countries via IPO listings. While much research has discussed the effects of external institutions, few research studies have systematically analyzed how institutional factors, as well as firm-specific characteristics such as entrepreneurial orientation (EO), jointly determine the performance of foreign IPOs. We suggest that a larger administrative distance negatively affects IPO performance, whereas EO positively affects IPO performance. At the same time, administrative distance negatively moderates the effects of EO on IPO performance. Findings from a sample of foreign firms that went public on the U.S. stock market between 2002 and 2012 support our hypotheses. The implications of these findings are discussed in this paper.

This paper presents sector-level analysis of voting decisions in corporate meetings. Non-negative matrix factorization (NNMF) algorithms are applied to detect disruptive events in the technology sector. The sample consists of 255 NASDAQ technology firms. The annual data used in this study capture votes on managerial proposals for the election and compensation of directors over the period 2003 to 2017. Voting decisions reflect two major disruptive events during that period: the financial crisis and the Facebook initial public offering. These two disruptive events are observed to substantially change the underlying trends behind voting decisions in the technology sector. Implications for researchers and practitioners are discussed.

Summary Participation in the Bitcoin blockchain validation process requires specialized hardware and vast amounts of electricity, which translates into a significant carbon footprint. Here, we demonstrate a methodology for estimating the power consumption associated with Bitcoin's blockchain based on IPO filings of major hardware manufacturers, insights on mining facility operations, and mining pool compositions. We then translate our power consumption estimate into carbon emissions, using the localization of IP addresses. We determine the annual electricity consumption of Bitcoin, as of November 2018, to be 45.8 TWh and estimate that annual carbon emissions range from 22.0 to 22.9 MtCO2. This means that the emissions produced by Bitcoin sit between the levels produced by the nations of Jordan and Sri Lanka, which is comparable to the level of Kansas City. With this article, we aim to gauge the external costs of Bitcoin and inform the broader debate on the costs and benefits of cryptocurrencies.

This paper investigates how public equity issuance is related to stock market liquidity. Using quarterly data on IPOs and SEOs in 36 countries over the period 1995-2008, we show that equity issuance is significantly and positively related to contemporaneous and lagged innovations in aggregate local market liquidity. This relation survives the inclusion of proxies for market timing, capital market conditions, growth prospects, asymmetric information, and investor sentiment. Liquidity considerations are as important in explaining equity issuance as market timing considerations. The relation between liquidity and issuance is driven by the quarters with the greatest deterioration in liquidity and is stronger for IPOs than for SEOs. Firms are more likely to carry out private instead of public equity issues and to postpone public equity issues when market liquidity worsens. Overall, we interpret our findings as supportive of the view that market liquidity is an important determinant of equity issuance that is distinct from other determinants examined to date.

This paper analyzes the occurrence of market timing and its effects on primary share issues (IPOs and SEOs) of 123 Brazilian firms in the 2004–2015 period, by investigating the relation between the cumulative abnormal returns and amount of proceeds raised. We use cumulative abnormal returns, before and after the share issue, as a proxy for equity market timing. The results indicate the existence of market timing in the decision to issue shares in the Brazilian capital market, reflected in the abnormal returns, resulting in obtaining a larger volume of resources by the companies practicing this behavior.