Terrorist attacks, investor sentiment, and the pricing of initial public offerings

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

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Detail(s)

Original languageEnglish
Article number101780
Journal / PublicationJournal of Corporate Finance
Volume65
Online published7 Nov 2020
Publication statusPublished - Dec 2020

Abstract

Using terrorist attacks as exogenous shocks to investor sentiment, we study the impact of investor sentiment on initial public offering (IPO) pricing. IPOs listed within the 30-day period following terrorist attacks, on average, experience lower first-day returns. The documented impact of terrorist attacks is magnified when there is greater IPO valuation uncertainty and when the terrorist attacks are more salient to investors, while mitigated for IPOs “certified” by reputable intermediaries. We also show that the affected IPOs, on average, have more pessimistic media tone in the post-attack/pre-listing day period. The affected IPOs also tend to have lower levels of price revisions, subscriptions, primary share revisions, and total proceeds. Collectively, our findings underscore the salience of investor sentiment in shaping IPO outcomes.

Research Area(s)

  • Investor sentiment, IPO pricing, Terrorist attacks

Citation Format(s)

Terrorist attacks, investor sentiment, and the pricing of initial public offerings. / Chen, Yangyang; Goyal, Abhinav; Veeraraghavan, Madhu; Zolotoy, Leon.

In: Journal of Corporate Finance, Vol. 65, 101780, 12.2020.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review