Investor Awareness or Information Asymmetry? Wikipedia and IPO Underpricing
63 Pages Posted: 31 Jan 2017 Last revised: 12 Oct 2018
Date Written: October 4, 2018
We use the presence of a Wikipedia article at the time of a firm’s initial public offering (IPO) to test theories of information asymmetry and investor attention. While we find limited support for the former in that IPOs with a Wikipedia article are more likely to experience upward offer price revisions during the roadshow, we find much stronger support for investor awareness. Specifically, IPO firms with a Wikipedia article exhibit significantly higher underpricing in comparison to firms without a Wikipedia article despite the upward price revisions. Importantly, investor awareness has positive long-term effects, as IPO firms with a Wikipedia article benefit from greater analyst following and attract more institutional investors for up to three years following the offering. The Wikipedia-IPO effect is robust to firm-specific Google search volume, news coverage, propensity score matching, and an instrumental variable approach.
Keywords: Initial Public Offerings, Investor Attention, Underpricing, Wikipedia
JEL Classification: D82, G14, G24, G32
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