The impact of marketing on Initial public Offering(IPOs)

Yahia Mohamed Khalil, Kareem; Mounir El-Sady, Hassan

doi:10.21608/jces.2024.417832

The impact of marketing on Initial public Offering(IPOs)

نوع المستند : المقالة الأصلية

المؤلفون

¹ Faculty of Commerce,Business Administration Department,Cairo University

² Faculty of Commerce,Finance and Investment,Business Administration Department,Cairo University

10.21608/jces.2024.417832

المستخلص

Derrien [2005. Journal of Finance 60, 487–521] and Ljungqvist et al. [2006. Journal of Business] build upon the work of Miller [1977. Journal of Finance 32, 1151–1168] and claim that issuers and the regular customers of investment bankers beneﬁt from the presence of sentiment investors (noise traders) in the market for an initial public offering (IPO). Thus we argue that investment bankers have an incentive to promote an IPO to induce sentiment investors into the market for it. Consistent with this motivation and these models, we expect that the promotional efforts of investment bankers should inﬂuence the compensation of investment bankers, the valuation of an IPO, its initial returns and trading, the wealth gains of insider shareholders, and the likelihood that an issuer switches investment bankers for a subsequent seasoned equity offering. Examining data for a sample of IPOs from 1993 through 2000, we ﬁnd evidence consistent with these predictions and so with the proposition that an investment banker’s ability to market an IPO to sentiment investors is important.

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