Investor relations and IPO performance

Chahine, Salim, Colak, Gonul, Hasan, Iftekhar and Mazboudi, Mohamad (2020) Investor relations and IPO performance. Review of Accounting Studies, 25. pp. 474-512. ISSN 1380-6653

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Abstract

We analyze the value of investor relations (IR) strategies to IPO firms. We find that firms that are less visible and have inexperienced management tend to hire IR consultants prior to the issue date. IR consultants help create positive news coverage before an IPO, as reflected in a more optimistic tone of published media. Their presence is associated with higher underpricing at the IPO date but with lower long-run returns. IR-backed IPOs also exhibit disproportionately higher insider-related agency problems, as IR-induced higher underpricing tends to occur primarily in IPOs where underwriter and venture capitalist agency conflicts are more severe. These findings suggest that the IR programs of IPO firm are mostly short-term oriented and facilitate the ulterior motives of some insiders (underwriters and venture capitalists) targeting higher first-day returns.

Item Type: Article
Schools and Departments: University of Sussex Business School > Accounting and Finance
SWORD Depositor: Mx Elements Account
Depositing User: Mx Elements Account
Date Deposited: 22 Feb 2022 09:19
Last Modified: 22 Feb 2022 10:37
URI: http://sro.sussex.ac.uk/id/eprint/104491

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