Post-IPO capital expenditures and market feedback

Bommel, Jos van; Vermaelen, Theo

doi:10.1016/s0378-4266(01)00249-7

Cited by 38 publications

(17 citation statements)

References 44 publications

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“…Instead, the natural logarithm is taken and we perform an OLS regression. 17 Raising funds for capital expenditures is a major motivation for going public and has been studied from a different perspective by van Bommel and Vermaelen (2003). They argue that post-IPO capital expenditures are related to firm value and find that firms receiving positive feedback from the market expend more capital than firms receiving negative feedback.…”

Section: Discussionmentioning

confidence: 99%

IPOs, clustering, indirect learning and filing independently

Colaco¹,

Ghosh²,

Knopf³

et al. 2009

Journal of Banking & Finance

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Section: Discussionmentioning

confidence: 99%

IPOs, clustering, indirect learning and filing independently

Colaco¹,

Ghosh²,

Knopf³

et al. 2009

Journal of Banking & Finance

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“…1 Among them, a growing strand of literature proposes that IPO investors could provide information that the issuers do not possess. The nature of the investor information could be about market conditions and demand for IPO shares (Benveniste and Spindt, 1989;Spatt and Srivastava, 1991), or a feedback and an assessment on prospects on firm's future investment (Jegadeesh, Weinstein and Welch, 1993;Subrahmanyam and Titman, 1999;Jos and Vermaelen, 2003). If investor information is of use, but costly to produce, this provides an incentive for corporate managers to intentionally underprice their unseasoned shares to compensate investors for producing information.…”

Section: Introductionmentioning

confidence: 99%

Information Collection and IPO Underpricing

Guo¹

2005

Rev Quant Finan Acc

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This study provides new evidence that IPO underpricing is economic rents paid for investor to gather costly information. Subrahmanyam and Titman (1999) report that diverse investor information, once aggregated in the public market, could provide a more informative stock price and accurate feedback to firm’s investment decision. I investigate the hypothesis that IPO underpricing as economic rents could be higher, when investor information is diverse. In support of this hypothesis, I find a positive and significant correlation between the extent of underpricing and the information diversity measure proposed by Barron et al. (1998). There is a positive and significant correlation between this information diversity measure and an IPO firm’s subsequent (absolute) change in capital and R&D expenditures. In addition, firms with high information diversity measure and change in subsequent investment exhibit a better subsequent return performance than firms with low diversity and change in investment. This is consistent with the proposition that investor information serves as useful feedback for managers in the IPO market. Copyright Springer Science+Business Media, Inc. 2005IPO underpricing, information production, information diversity,

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“…The information momentum model (Aggarwal et al, 2002) is also strongly supported. We find limited support for the information production (Chemmanur, 1993), market feedback (Jegadeesh et al, 1993;van Bommel, 2002;van Bommel and Vermaelen, 2003) and changing objective function model (Loughran and Ritter, 2004). The signaling explanation (Allen and Faulhaber, 1989;Grinblatt and Hwang, 1989;Welch, 1989Welch, , 1996 has little support.…”

Section: Introductionmentioning

confidence: 69%

“…In the market feedback model (Jegadeesh et al, 1993;van Bommel, 2002;van Bommel and Vermaelen, 2003), investors are better informed about firm value than the managers. The owner-managers choose the amount of the IPO and the offer price to maximize information production by informed investors.…”

Section: The Market Feedback Modelmentioning

confidence: 99%