What do employees know? Quality perception and ‘over-satisfaction’ in firms going public

Reza Farhadi and Vikram Nanda

Journal of Corporate Finance, 2021, vol. 66, issue C

Abstract: Should IPO investors pay attention to employees' views on firm quality and work satisfaction (e.g., work-life-balance)? We track employees' opinions (Glassdoor) in private firms that subsequently go public. Employees' pre-IPO views are informative: positive reviews of firm/manager quality predict stronger post-IPO stock performance, while dispersion in opinions correlates with post-IPO return volatility. A striking finding is that employees' satisfaction in excess of that predicted by firm quality opinions (over-satisfaction) is negatively related to post-IPO performance. Finally, positive initial-day stock returns enhance employees' views regarding firm quality, suggesting that IPO underpricing may secure a boost in employees' morale.

Keywords: IPOs; Underpricing; Post-IPO performance; Glassdoor; employees' opinions; Work-life balance; Private firms; Over-satisfaction (search for similar items in EconPapers)
JEL-codes: G14 G30 G32 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:66:y:2021:i:c:s0929119920302236

DOI: 10.1016/j.jcorpfin.2020.101779

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