The Effects of IPO Marketing Breadth: Evidence From Weather-Induced Variation in Roadshow Prospectus Distribution

55 Pages Posted: 22 Apr 2021 Last revised: 16 Jan 2024

See all articles by Matthew Gustafson

Matthew Gustafson

Pennsylvania State University - Smeal College of Business

Joseph J. Henry

Northeastern University - D’Amore-McKim School of Business

Emily Kim

University of Kansas - School of Business

Kevin Pisciotta

University of Kansas - School of Business

Date Written: October 5, 2023

Abstract

Using the number of prospectuses underwriters distribute during the roadshow as a novel measure of IPO marketing breadth, we show wider marketing negatively relates to expected rationing risk and positively relates to issuer bargaining power. Two stage least squares estimates exploiting weather-induced travel disruptions indicate marketing breadth increases price revisions, but has little effect on underpricing, suggesting most of the pricing benefits to marketing breadth accrue to initial investors. Underwriters benefit from higher fees, while issuers obtain higher post-IPO liquidity and ownership breadth. Our results provide direct evidence on the costs and benefits of expanding
underwriter pre-IPO information dissemination.

Keywords: Initial Public Offerings; IPO Marketing Breadth; IPO Roadshows; Underwriter Marketing; Weather Disruptions

JEL Classification: G20, G24, G30

Suggested Citation

Gustafson, Matthew and Henry, Joseph J. and Kim, Emily and Pisciotta, Kevin, The Effects of IPO Marketing Breadth: Evidence From Weather-Induced Variation in Roadshow Prospectus Distribution (October 5, 2023). Available at SSRN: https://ssrn.com/abstract=3830911 or http://dx.doi.org/10.2139/ssrn.3830911

Matthew Gustafson

Pennsylvania State University - Smeal College of Business ( email )

East Park Avenue
University Park, PA 16802
United States

Joseph J. Henry (Contact Author)

Northeastern University - D’Amore-McKim School of Business ( email )

360 Huntington Ave.
Boston, MA 02115
United States

Emily Kim

University of Kansas - School of Business ( email )

Capitol Federal Hall
1654 Naismith Dr.
Lawrence, KS 66045
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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