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
Date Written: October 5, 2023
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: Suggested Citation