Many rigorous studies on IPO activities have been performed in the literature,
yet few have discussed a firm’s reputation effects. This paper performs a reputation
model to analyze a firm’s reputation effects on IPO activities, especially on the
decision to go public and IPO pricing. We find that when the firm owns private
information of its management quality, the firm’s reputation hence affects its decision
to go public. By listing equities publicly, good management quality firms with a
good past anticipate enhancing their reputations and those with a poor past anticipate
building up good names. They are respectively regarded as reputation-enhancing
and reputation-building effects. On the other hand, good reputation firms with bad
management quality anticipate maintaining their reputations by going public and this
is regarded as the reputation-maintaining effect.
But, in this paper, we also find that firms of good management quality
over-invest in building up their reputations and those of bad management quality take
advantage of their reputations to go public. Both result in firms’over-going public
and IPO mispricing; firms of good quality underprice their equities and firms of bad
one overprice their IPOs. This constitutes an alternative interpretation on IPOs’
long-run underperformance and the sharp decline of the survival rate.
Keywords: reputation, going-public decision, over-going public, IPO mispricing
학술대회/행사
학술대회안내
[2008년 제 4차] Reputation, IPO Decisions and IPO Mispricin
작성자 : 관리자
조회수 : 1026
게시일 :
2008-12-11