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http://ssrn.com/abstract=1108341
 
 

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Does Favorable Investor Sentiment Lead to Costly Decisions to Go Public?


Azizjon Alimov


City University of Hong Kong

Wayne H. Mikkelson


University of Oregon - Department of Finance

February 15, 2012

Journal of Corporate Finance, Forthcoming

Abstract:     
We investigate the real effects of decisions to undertake an initial public offering of stock in periods of favorable investor sentiment. Specifically, we examine potential effects of favorable investor sentiment on investment expenditures and how effects on investment affect firm operating performance and value as well as the likelihood of survival. We find that firms going public during periods of favorable sentiment, on average, spend substantially more on investments, especially acquisitions, than firms going public in other periods. The effect of favorable investor sentiment on investment is more pronounced for younger firms. We do not find, however, that the higher investment spending in the wake of favorable sentiment leads to worse operating or stock performance. Stock returns around acquisitions announcements are also positive for firms going public in favorable sentiment periods. The preponderance of our findings indicate that decisions to go public in favorable investor sentiment periods do not lead to corporate investment decisions that harm firm performance and value.

Keywords: initial public offerings, market conditions, operating performance, delisting rates

JEL Classification: C14, G30


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Date posted: March 25, 2008 ; Last revised: April 17, 2015

Suggested Citation

Alimov, Azizjon and Mikkelson, Wayne H., Does Favorable Investor Sentiment Lead to Costly Decisions to Go Public? (February 15, 2012). AFA 2009 San Francisco Meetings Paper; Journal of Corporate Finance, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1108341 or http://dx.doi.org/10.2139/ssrn.1108341

Contact Information

Azizjon Alimov (Contact Author)
City University of Hong Kong ( email )
83 Tat Chee Avenue
Kowloon
Hong Kong
(852) 3442-2168 (Phone)
(852) 3442-0195 (Fax)
Wayne H. Mikkelson
University of Oregon - Department of Finance ( email )
Lundquist College of Business
1208 University of Oregon
Eugene, OR 97403
United States
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