Investor relations and IPO performance

Salim Chahine, Gonul Colak, Iftekhar Hasan*, Mohamad Mazboudi

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

1 Citation (Scopus)

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.
Original languageEnglish
Peer-reviewed scientific journalReview of Accounting Studies
Volume25
Issue number2
Pages (from-to)474-512
Number of pages39
ISSN1380-6653
DOIs
Publication statusPublished - 17.04.2020
MoE publication typeA1 Journal article - refereed

Keywords

  • 511 Economics
  • initial public offering
  • investor relations
  • media
  • agency problems
  • underwriters
  • venture capitalists
  • analyst forecasts
  • 512 Business and Management

Areas of Strength and Areas of High Potential (AoS and AoHP)

  • AoS: Financial management, accounting, and governance

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