The effect of company name fluency on venture investment decisions and IPO underpricing
Chien-Sheng Richard Chan,
Haemin Dennis Park and
Venture Capital, 2018, vol. 20, issue 1, 1-26
We explore the influence of company name on pre-venture and post-success financing outcomes of new ventures. A company name could be linguistically fluent, that is whether a name appears to be realistic and familiar, or phonetically fluent, that is whether a name is pronounceable. These variations could lead to varying financing outcomes. We argue that pre-venture investors favor ventures with low linguistically fluent names because of their preference in investing in unique ventures and with high phonetically fluent names as such names could automatically elicit favorable impressions. In contrast, post-success investors may still favor investing in ventures with high phonetically fluent names, but are less influenced by linguistic fluency because they are less concerned about a venture’s uniqueness. Our predictions are supported by two studies.
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