Buying Analyst and Investor Attention through IPO Proceeds

47 Pages Posted: 30 Apr 2017 Last revised: 18 Jun 2019

See all articles by Michael Dambra

Michael Dambra

SUNY at Buffalo - School of Management

Matthew Gustafson

Pennsylvania State University - Smeal College of Business

Kevin Pisciotta

University of Kansas - School of Business

Date Written: June 17, 2019

Abstract

We examine the effect of IPO proceeds on the post-IPO information environment. We exploit variation in the amount of capital raised across IPOs that is unrelated to firm size and manager decisions using an instrumental variable approach, and find that marginal increases in IPO proceeds lead to large increases in analyst coverage and institutional ownership in the first two years a firm is public. Increases in IPO proceeds also lead to more frequent follow-on offerings and longer survival as a public firm. We find evidence that immediate shocks to ownership diversification represent one plausible channel through which changes in IPO proceeds affect long-run visibility and investor demand. Overall, our findings highlight important rewards to selling additional shares at the IPO.

Keywords: Initial Public Offering, Institutional Ownership, Analyst Coverage, Visibility

JEL Classification: G32, G24, G23

Suggested Citation

Dambra, Michael and Gustafson, Matthew and Pisciotta, Kevin, Buying Analyst and Investor Attention through IPO Proceeds (June 17, 2019). Available at SSRN: https://ssrn.com/abstract=2958409 or http://dx.doi.org/10.2139/ssrn.2958409

Michael Dambra

SUNY at Buffalo - School of Management ( email )

354 Jacobs Management Center
Buffalo, NY 14260-1660
United States
716-645-3237 (Phone)

Matthew Gustafson (Contact Author)

Pennsylvania State University - Smeal College of Business ( email )

East Park Avenue
University Park, PA 16802
United States

Kevin Pisciotta

University of Kansas - School of Business ( email )

Capital Federal Hall
1654 Naismith Dr
Lawrence, KS 66045
United States

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