Firm resources and quality signalling: evidence from UK initial public offerings

Reber, Beat; Berry, Bob; Toms, Steve

doi:10.1080/0960310042000323610

Cited by 12 publications

(8 citation statements)

References 48 publications

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“…More reputable underwriters are more likely associated with less risky offerings and hence underprice less (Jenkinson and Ljungqvist, 2001). Reputation capital has been based on tombstone rankings (Carter and Manaster, 1990), market share of all IPO proceeds (Reber et al, 2005), and bulge bracket banks (Carter and Manaster, 1990). Some studies report a negative relationship between reputation and mispricing (Firth and Smith, 1992); others report a positive association (Beatty and Welch, 1996), while still others report no statistically significant findings (McGuinness, 1992).…”

Section: Mispricing Of Iposmentioning

confidence: 98%

Explaining mispricing of initial public offerings in Singapore

Reber

Fong²

2006

Applied Financial Economics

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This study examines the relative importance of underpricing as a signal of firm value, underwriter certification, subscription levels of shares on offer, and uncertainty surrounding firm value on mispricing of initial public offerings. A sample of 100 Singaporean initial public offerings (IPOs) during the period 1998 to 2000 indicates that subscription levels of shares on offer have the most significant impact on mispricing. This is followed by offer price, market value and trading volume in IPO shares on the first day of trading, and uncertainty surrounding IPO value. Underwriter reputation appears to be only marginally influential, while equity market conditions and industry sector effects seem to be irrelevant in explaining mispricing. Singaporean IPOs have been selected because this is only one of a few markets whose unique institutional characteristics and data availability allows for such a test.

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Section: Mispricing Of Iposmentioning

confidence: 98%

Explaining mispricing of initial public offerings in Singapore

Reber

Fong²

2006

Applied Financial Economics

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“…They are also less concerned about underpricing, as they anticipate that underpricing increases the chances of a fully subscribed IPO and helps to turn their long-term value-maximizing strategy into a success (Allen and Faulhaber, 1989). We focus on three stakeholder groups with long-term intent: CEO founders (Certo et al, 2001a;Nelson, 2003), retained owners (McBain and Krause, 1989;Reber et al, 2005), and institutional investors (Sanders and Boivie, 2004).…”

Section: Long-term Orientation Underpricing and Proceedsmentioning

confidence: 99%

“…For shareholders of lower-quality companies, retaining equity is a costly signal to send, as they may not be able to sell their shares on equally favorable terms later. Thus, only shareholders of high-quality companies would be willing to retain ownership while increasing underpricing at the IPO moment (Reber et al, 2005;McBain and Krause, 1989). Retained ownership similarly corresponds to a wealth-maximization strategy focused on lower initial proceeds and seasoned offerings at a later stage.…”

Section: Long-term Orientation Underpricing and Proceedsmentioning

confidence: 99%

The impact of stakeholders’ temporal orientaton on short- and long-term IPO outcomes: A meta-analysis

Engelen

Heugens

Essen

et al. 2020

Long Range Planning

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An initial public offering (IPO) represents a unique milestone in the lifecycle of a firm. Yet, our understanding of the IPO phenomenon remains incomplete and marked by mixed findings. Using meta-analytical techniques on a sample of 123 empirical studies, we examine the factors that influence the short-term outcomes (i.e., underpricing and proceeds) and the long-term outcomes (i.e., financial performance and risk) of IPO firms. Our efforts yield few significant results for antecedents that prior research had proposed as effective signals of IPO firm quality, and we thus conclude that signaling theory is limited in its ability to capture the IPO process. Our findings, however, provide preliminary support for our contention that stakeholders influence short-term IPO outcomes depending on their temporal orientation. We also find strong support for our prediction that the IPO has consequences for long-term firm development. While high underpricing positively affects long-term firm performance, it also heightens long-term firm risk. Large proceeds result in higher long-term firm performance and lower firm risk, but they come at the expense of a higher percentage of equity being traded during the IPO.

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“…Information asymmetry may produce the problem of adverse selection (Akerlof, 1970) however, management apply disclosure to indicate the underlying reality and to influence stakeholders. Signalling mechanisms improve the allocation of resources ensuring that companies that are more efficient receive more capital (Inchausti, 1997;Reber, Berry, & Toms, 2005) as signalling reveals the company's competitive advantage within the market. Management of such companies signal their superior capabilities in order to differentiate themselves from companies without such a competitive advantage.…”

Section: Voluntary Disclosure Framework and The Conceptual Frameworkmentioning

confidence: 99%

Influence of Intellectual Capital Investment, Risk, Industry Membership and Corporate Governance Mechanisms on the Voluntary Disclosure of Intellectual Capital by UK Listed Companies

Mkumbuzi¹

2015

ASS

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This research examines the cross-sectional effect of intellectual capital investment, financial measures of market and company specific risk, industry membership and corporate governance on the extent of voluntary disclosure of intellectual capital (VDIC) in a sample of 443 FTSE All Share Index company annual reports for the year 2003/2004. The extent of disclosure is measured by a disclosure index (DI) based on intellectual capital (IC) attributes included in the narratives and illustrations of the annual reports. The research predicts that agency costs are mitigated by VDIC and that the benefits of signalling IC may outweigh competitive and proprietary costs that may be more prevalent in innovative and technological companies; furthermore, that effective corporate governance measures enhance VDIC particularly in those companies found to have a higher level of intangible assets (IA) in their resource base. The results suggest that companies associated with less financial risk, reduced debt, higher levels of liquidity and accompanied by growth are characterised with higher levels of VDIC. Although less significant, the results on market risk indicate a positive influence on VDIC. Furthermore, the extent of VDIC in annual reports is enhanced when large companies operating in high-tech and innovative industries are characterised by investments in employees; in contrast, companies associated with research and development processes tend to be more secretive with respect to VDIC. The results suggest that companies that are able to maintain adequate governance systems through segregation of executive and non-executive duties and to a less extent through the presence of experienced non-executive directors exhibit higher levels of disclosure.

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Firm resources and quality signalling: evidence from UK initial public offerings

Cited by 12 publications

References 48 publications

Explaining mispricing of initial public offerings in Singapore

Explaining mispricing of initial public offerings in Singapore

The impact of stakeholders’ temporal orientaton on short- and long-term IPO outcomes: A meta-analysis

Influence of Intellectual Capital Investment, Risk, Industry Membership and Corporate Governance Mechanisms on the Voluntary Disclosure of Intellectual Capital by UK Listed Companies

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