Investor awareness or information asymmetry? Wikipedia and IPO underpricing

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.

Seasoned equity issuers’ prospectus filings: How informative is their tone?

“…If there are significant changes, 5 Third parties unaffiliated with issuers and investors also produce or transmit information, reducing information asymmetry and thereby the underpricing of IPOs and SEOs. However, Boulton et al (2021) find that the presence of a Wikipedia article is positively related to IPO underpricing, inconsistent with information asymmetry-based explanations. They suggest that the presence of a Wikipedia article captures investor awareness.…”

The dark side of IPOs: Examining where and who trades in the IPO secondary market

“…16 Recently, Yang and Yuan (2021) provide causal evidence that the number of traders for IPO firms help reduce information uncertainty for investors, resulting in less underpricing. Additionally, Boulton et al (2021) show that IPO firms with a Wikipedia article have higher underpricing than IPO firms without a Wikipedia article. Note: This table reports the results from estimating the following fixed-effects regression equation for our sample of IPO firms on their respective offering date: where the dependent variable in columns (1) and ( 2) is a measure of dark trading using a ratio of dark trading to overall trading via volume or number of trades and columns (3) and (4), the dependent variable refers to our measure of hidden trading using a ratio of executed hidden trades or volume to all executed trades or volume.…”

A Textual Analysis of Logograms in Chinese IPO Roadshows: How Agreement between Investors and Management Relates to Pricing and Performance

“…Theoretical models, such as Baron (1982) and Rock (1986), began explaining IPO underpricing in the context of asymmetric information (see also Li et al (2005) and Boulton et al (2021) for more recent treatments of information asymmetry in IPOs). Early empirical explanations of this anomaly have focused on quantifiable market and financial statement data (Beatty and Ritter 1986;Hanley 1993;Brau et al 2014).…”