Abstract:Purpose
The purpose of this study is to assess how the information disclosed in prospectuses impacted the initial public offering (IPO) underpricing at a time of high government interference amid the ongoing pandemic.
Design/methodology/approach
The design of this study has several tracks, namely, a macro-level track, which is represented by the government measures to halt the pandemic; a micro-level track, which is followed by textual analysis of IPO prospectuses; and, finally, a machine learning track, in … Show more
“…As an ex‐ante summary, the prospectus provides investors with first impressions of a company's financial and business strategies and plans. Information obtained from prospectuses through text analysis can be used to investigate IPO under‐pricing phenomenon (Guo et al, 2022), risk‐taking behaviour (Fedorova et al, 2022) and conservatism (Ferris et al, 2013). Hence, following Baier et al (2020), we use the ‘bag of words’ to quantify the degree of ESG activities of each IPO.…”
This study explores the relationship between economic, social, and governance (ESG) activities and initial public offering (IPO) price stabilisation actions using IPOs listed on the Hong Kong stock exchange between 2004 and 2021 as samples. We find that IPO issuers that actively conduct ESG activities have higher ESG scores, which enhances price stabilisation. Furthermore, ex‐ante volatility serves as a potential channel through which ESG activities affect price stabilisation. Providing ethical and economic implications for companies, policymakers, and investors, our findings suggest that ESG activities are vital drivers of price stabilisation.
“…As an ex‐ante summary, the prospectus provides investors with first impressions of a company's financial and business strategies and plans. Information obtained from prospectuses through text analysis can be used to investigate IPO under‐pricing phenomenon (Guo et al, 2022), risk‐taking behaviour (Fedorova et al, 2022) and conservatism (Ferris et al, 2013). Hence, following Baier et al (2020), we use the ‘bag of words’ to quantify the degree of ESG activities of each IPO.…”
This study explores the relationship between economic, social, and governance (ESG) activities and initial public offering (IPO) price stabilisation actions using IPOs listed on the Hong Kong stock exchange between 2004 and 2021 as samples. We find that IPO issuers that actively conduct ESG activities have higher ESG scores, which enhances price stabilisation. Furthermore, ex‐ante volatility serves as a potential channel through which ESG activities affect price stabilisation. Providing ethical and economic implications for companies, policymakers, and investors, our findings suggest that ESG activities are vital drivers of price stabilisation.
PurposeDriven by the anticipated global stagflation, this straightforward yet novel study examines the cost of inflation as a macroeconomic factor by investigating its influence on stock market growth. Thus, this paper aims to examine the impact of inflation on the probability of initial public offering (IPO) withdrawal decision.Design/methodology/approachThe paper employs a large dataset that covers the period January 1995–December 2019 and comprises 33,536 successful or withdrawn IPOs from 22 nations with various legal and cultural systems. This study applies a probit model utilizing version 15 of Stata statistical software.FindingsThis study finds that inflation is substantially and positively correlated with the likelihood of IPO withdrawal. Results of this study show that the IPO withdrawal decision increases up to 90% when the inflation rate climbs by 10%. Multiple robustness tests provide consistent findings.Practical implicationsThis study's implications are important for researchers, investment banks, underwriters, issuers, regulators and stock exchanges. When processing IPO proposals, investment banks, underwriters and issuers must consider inflation projections to avoid negative effects, as demonstrated by the findings. In addition, regulators and stock exchanges must be aware of the detrimental impact of inflation on competitiveness in attracting new listings.Originality/valueTo the best of the authors’ knowledge, this study is the first to present convincing evidence of a major relationship between IPO withdrawal decision and inflation.
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