XXV Edition

1-2 December 2016"

Investor Relations and Ipo Performance

Hasan Iftekhar, Fordham University
Chahine Salim, American University of Beirut
Colak Gonul, Hanken School of Economics
Mazboudi Mohamad , American University of Beirut

Using a sample of 380 IPOs from 2009 to 2013, we provide new evidence on the role of investor relations (IR) firms in IPOs. We find that smaller (i.e., less visible) IPOs and those with lower CEO human capital are more likely to hire IR firms prior to their equity offering. After controlling for the endogenous decision of hiring an IR firm, we find that the presence of IR firms is positively related to the IPO price revision, underpricing, and market liquidity, but is negatively related to the one-year aftermarket abnormal returns. Consistent with the spin hypothesis, we further find that IR firms spin their clients’ news by having a more optimistic tone in the media, and this optimism is positively (negatively) related to short-term (long-term) IPO performance.

Area:

Keywords: Initial public offering; IPO performance; Investor relations; Media news; Publicity.

Paper file

University Network