Investor awareness or information asymmetry? Wikipedia and IPO underpricing

Thomas Boulton, Bill B. Francis, Thomas Shohfi and Daqi Xin

The Financial Review, 2021, vol. 56, issue 3, 535-561

Abstract: We use the presence of a Wikipedia article for initial public offering (IPO) firms to test theories of information asymmetry and investor awareness. Although we find limited support for the former, our results provide strong support for theories of investor awareness. Specifically, IPO firms with a Wikipedia article exhibit significantly higher underpricing and offer price revisions than do IPO firms without a Wikipedia article. Investor awareness has positive long‐term effects, including greater analyst following and institutional ownership for up to 3 years after the offering. The effect is robust to firm‐specific Google search volume, news coverage, retail trading intensity, social media activity, propensity score matching, and an instrumental variable approach.

Date: 2021
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