“…To measure valuation, we follow the studies of Chemmanur and Loutskina () and Johnson et al . (), who utilize the logarithm of the IPO firm relative valuation measure as the dependent variable. Taking logarithms helps to reduce the impact of outliers in the sample .…”
Section: Resultsmentioning
confidence: 99%
“…Johnson et al . () suggest that major customers are often an important and prevalent stakeholder for IPO firms and an indicator for having major customers can be an effective proxy for the importance of stakeholder relationships. The aforementioned argument leads to the following hypothesis. Hypothesis 2.…”
Section: Hypothesis Developmentmentioning
confidence: 99%
“…First, we utilize an IPO firm's stock valuation at the IPO offer price divided by the valuation of a comparable firm, called the relative stock valuation, to assess the effect of founder CEO status on firm value, a measure that is widely used in the IPO literature, but has limited use in the corporate governance literature. Previous studies suggest that an IPO firm's relative stock valuation is a reliable measure of firm value because sophisticated underwriters utilize information from their institutional clients and gained from the road shows in setting the IPO firm's offer price (Kim and Ritter, ; Purnanandam and Swaminathan, ; Chemmanur and Loutskina, ; Johnson et al ., ). The IPO relative valuation avoids several statistical problems associated with Tobin's Q as pointed out by Erickson and Whited () .…”
We examine the value impact of founder CEOs and explore possible mechanisms whereby founder CEOs' unique characteristics affect their firms' value and long‐term market performance. We find that founder CEOs' status is positively related to market valuation and long‐term stock performance of firms. Furthermore, a lower likelihood of involuntary turnover for founder CEOs is positively associated with market valuation. We also find that CEOs are most likely to generate positive abnormal returns when protected from takeover markets. Our paper suggests that founder CEOs create value by strengthening a firm's stakeholder relationships and alleviating information asymmetry in financial markets, when other certifying entities do not participate in initial public offerings.
“…To measure valuation, we follow the studies of Chemmanur and Loutskina () and Johnson et al . (), who utilize the logarithm of the IPO firm relative valuation measure as the dependent variable. Taking logarithms helps to reduce the impact of outliers in the sample .…”
Section: Resultsmentioning
confidence: 99%
“…Johnson et al . () suggest that major customers are often an important and prevalent stakeholder for IPO firms and an indicator for having major customers can be an effective proxy for the importance of stakeholder relationships. The aforementioned argument leads to the following hypothesis. Hypothesis 2.…”
Section: Hypothesis Developmentmentioning
confidence: 99%
“…First, we utilize an IPO firm's stock valuation at the IPO offer price divided by the valuation of a comparable firm, called the relative stock valuation, to assess the effect of founder CEO status on firm value, a measure that is widely used in the IPO literature, but has limited use in the corporate governance literature. Previous studies suggest that an IPO firm's relative stock valuation is a reliable measure of firm value because sophisticated underwriters utilize information from their institutional clients and gained from the road shows in setting the IPO firm's offer price (Kim and Ritter, ; Purnanandam and Swaminathan, ; Chemmanur and Loutskina, ; Johnson et al ., ). The IPO relative valuation avoids several statistical problems associated with Tobin's Q as pointed out by Erickson and Whited () .…”
We examine the value impact of founder CEOs and explore possible mechanisms whereby founder CEOs' unique characteristics affect their firms' value and long‐term market performance. We find that founder CEOs' status is positively related to market valuation and long‐term stock performance of firms. Furthermore, a lower likelihood of involuntary turnover for founder CEOs is positively associated with market valuation. We also find that CEOs are most likely to generate positive abnormal returns when protected from takeover markets. Our paper suggests that founder CEOs create value by strengthening a firm's stakeholder relationships and alleviating information asymmetry in financial markets, when other certifying entities do not participate in initial public offerings.
“…Customer and supplier links also affect suppliers’ dividend policies. Johnson, Kang, and Yi () argue that a large customer monitors suppliers and reduces the information asymmetry between suppliers and their shareholders. If the monitoring of principal customers substitutes for dividend payments to control the free cash‐flow problem, customers’ monitoring will have a negative relation to suppliers’ dividend payments.…”
Section: Literature Review and Hypotheses Developmentmentioning
We provide empirical evidence that supplier firms’ managers learn new information from their customers’ stock prices when they make investment, long‐term financing, short‐term financing, and dividend decisions. Our findings provide novel empirical evidence that the stock market has real effects on the economy through customer–supplier links. Our results indicate that managerial learning is not confined to peers’ or firms’ own stock prices but is a more comprehensive process that includes cross‐industry learning. Furthermore, managerial learning is not limited to investment decisions but is also present in long‐term financing, short‐term financing, and dividend decisions.
“…Similar to Chemmanur and Loutskina (), Kim and Ritter (), Zheng (), and Johnson et al. (), I consider the benchmarking technique a way to produce a relative measure of IPO firm valuation without making any judgment about whether the firm is overvalued or undervalued.…”
I use the context of a company's initial public offering (IPO) of equity securities as a capital‐market setting to empirically study the economic consequences of risk factor disclosures. Using data from Australian IPOs, I examine the relation of textual risk disclosures in the prospectus to initial underpricing. I find that the quantity of disclosures in the risk factor section itself has no significant impact on initial underpricing. However, an increase in the informativeness of risk factor disclosures is associated with lower IPO underpricing. My results suggest that IPOs that provide informative risk factor disclosures have less ex ante uncertainty, in the sense that the disclosures help investors estimate the dispersion of secondary market value. The effect of informative risk factor disclosures on IPO underpricing is more pronounced for IPOs with less prestigious lead underwriters and is mainly driven by younger firms, smaller firms, and firms with poorer operating performance prior to their IPOs. Collectively, my findings suggest that informative disclosures of downside risk are useful for investors to evaluate IPOs.
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