Investor relations and IPO performance

Salim Chahine (), Gonul Colak (), Iftekhar Hasan and Mohamad Mazboudi ()
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Salim Chahine: American University of Beirut
Gonul Colak: Hanken School of Economics
Mohamad Mazboudi: American University of Beirut

Review of Accounting Studies, 2020, vol. 25, issue 2, No 3, 474-512

Abstract: 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.

Keywords: Initial public offering; Investor relations; Media; Agency problems; Underwriters; Venture capitalists; Analyst forecasts (search for similar items in EconPapers)
JEL-codes: G12 G14 G30 L82 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (34)

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DOI: 10.1007/s11142-019-09526-8

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