How does corporate culture affect IPO price formation?

Douglas Cumming, Gerrit Köchling, Daniel Neukirchen and Peter N. Posch

Journal of Banking & Finance, 2024, vol. 163, issue C

Abstract: We examine the relationship between corporate culture and initial public offering (IPO) price formation. Using a sample of 935 US IPOs and data on corporate culture from Li et al. (2021b), we find that IPOs of strong culture firms are associated with more positive price revisions and higher initial returns, i.e., more underpricing. These findings hold using an alternative measure of corporate culture, matched samples, and a large set of control variables. Consistent with key theories, the effects appear to be driven by underwriters deliberately compensating investors for revealing information about their perceptions of the firm's culture during bookbuilding.

Keywords: Initial public offering; Corporate culture; Underpricing; Price revision (search for similar items in EconPapers)
JEL-codes: G12 G14 G30 Z10 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:163:y:2024:i:c:s0378426624000785

DOI: 10.1016/j.jbankfin.2024.107158

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