57 Pages Posted: 13 Aug 2012 Last revised: 8 Feb 2013
Date Written: February 5, 2013
Form S-1 is the first SEC filing in the initial public offering (IPO) process. The tone of the S-1, in terms of its definitiveness in characterizing the firm’s business strategy and operations, should affect investors’ ability to value the IPO. We find that IPOs with high levels of uncertain text have higher first-day returns, absolute offer price revisions, and subsequent volatility. Our findings provide empirical evidence for the theoretical models of uncertainty, bookbuilding, and prospect theory.
Keywords: IPOs, first-day returns, bookbuilding, S-1 filings, textual analysis
JEL Classification: G14, G18, G24
Suggested Citation: Suggested Citation
Loughran, Tim and McDonald, Bill, IPO First-Day Returns, Offer Price Revisions, Volatility, and Form S-1 Language (February 5, 2013). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: https://ssrn.com/abstract=2128766 or http://dx.doi.org/10.2139/ssrn.2128766