Trademark and IPO Underpricing
Posted: 19 Oct 2019 Last revised: 20 Jan 2020
Date Written: August 1, 2019
This paper studies the relationship between a firm’s pre-IPO trademarks and its IPO underpricing. Using 4,321 US IPOs during the period 1980-2016, we find that firms with a larger number of trademarks prior to the IPO date experience significantly less IPO underpricing. We employ a quasi-natural experiment brought about by the 1996 Federal Trademark Dilution Act and an instrumental variable approach to establish causality. Our findings suggest that trademarks help reduce information asymmetry among various IPO participants, leading to less underpriced IPOs.
Keywords: trademark; IPO underpricing; information asymmetry; limit attention
JEL Classification: G12, G24, G30, O34
Suggested Citation: Suggested Citation