Rhetoric, Risk, and Investment: Letting the Numbers Speak for Themselves

McLeod, Michael S.; Sears, Joshua B.; Chandler, Gaylen N.; Payne, G. Tyge; Brigham, Keith H.

doi:10.1111/joms.12812

Cited by 5 publications

(1 citation statement)

References 86 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Further, research should more thoroughly examine how signals are portrayed to audiences to better understand mechanisms through which signal receivers assimilate and utilize information. For example, a recent study by McLeod and colleagues (2022) finds that framing the IPO prospectus using more logos (i.e., logical) argumentation to support financial data may be counterproductive. Rather, prospectus authors should focus more on framing with stronger pathos (i.e., emotional) and ethos (i.e., ethical) arguments to supplement the more objective data provided in the prospectus.…”

Section: Discussionmentioning

confidence: 99%

Ambiguous Signals and Information Asymmetry in the Initial Public Offering Process: Examining Ownership Concentration, Process Time, and Underpricing

Payne

Trudell

Moore

et al. 2022

Group & Organization Management

Self Cite

View full text Add to dashboard Cite

Initial public offerings (IPOs) represent an important stage of development for many firms as they try to gain access to the resources needed for growth and development. Due to the information asymmetry that accompanies the process, there is extensive research examining what factors might signal quality to potential investors such that the IPO might be more optimally valuated and priced. Herein, we hypothesize and empirically explore how a mixed or ambiguous signal about a firm—the signal of ownership concentration in this case—might be overcome with more opportunities for information disclosure and, thus, lessen underpricing; IPO stocks tend to be underpriced (i.e., the offer price of a stock is lower than the inherent market value), which means that owner’s “leave money on the table.” Using a generalized structural equation model of data on 601 U.S. IPO firms, we find support for our model by demonstrating that longer IPO process times (i.e., days from the IPO firm’s filing date to the actual issue date)—representing opportunities to disclose and disseminate information—act as a mediator between ownership concentration and underpricing. Further, we show that the age of the firm also influences this process model arguing that more historical data and other information is more readily available to the potential investor with increased firm age. Overall, our study contributes to the literature by demonstrating how more disclosure and dissemination of relevant information might reduce asymmetries associated with more ambiguous or difficult-to-interpret signals and improve outcomes.

show abstract

Section: Discussionmentioning

confidence: 99%

Ambiguous Signals and Information Asymmetry in the Initial Public Offering Process: Examining Ownership Concentration, Process Time, and Underpricing

Payne

Trudell

Moore

et al. 2022

Group & Organization Management

Self Cite

View full text Add to dashboard Cite

show abstract

Mapping the signaling environment between sustainability‐focused entrepreneurship and investment inputs: A topic modeling approach

Yang,

Dousios,

Korfiatis

et al. 2024

Bus Strat Env

View full text Add to dashboard Cite

The need for climate action has increased attention to sustainability‐focused entrepreneurship. In this context, entrepreneurial firms play a fundamental role in developing high‐technology solutions for decarbonization but face funding gaps due to the liabilities of newness and smallness. Despite the importance of signaling in entrepreneurship, little is known about what and how to effectively signal to attract investor interest in small ventures that develop sustainable technologies. To address this gap, the present study is anchored in signaling theory and suggests a topic modeling solution to identify signals presented in company self‐descriptions and areas of activity, alongside their investment inputs. Using data extracted from Crunchbase, a corpus of 5099 self‐descriptions of small sustainable technology ventures over a period of 10 years, this study provides novel insights into the signaling environment of sustainability‐focused entrepreneurship. The study's findings have implications for the sustainability ecosystem, namely, start‐ups, small‐ and medium‐sized enterprises, investors, and policymakers.

show abstract

Communication under Uncertainty and the Role of Founders’ Information Advantage: Evidence from SPAC IPOs

Naumovska,

Harmon

2024

Strategy Science

View full text Add to dashboard Cite

This study develops a novel framework about how a firm’s financing outcome will be shaped by its communication under different types of uncertainty. Whereas prior work has largely focused on uncertainties that arise because of founders having a knowledge advantage over investors, we examine a firm’s communication in situations of more fundamental uncertainty when both founders and investors face knowledge problems. Our framework proposes that in situations where founders have a knowledge advantage over investors (i.e., when there is information asymmetry), firms that reduce uncertainty by sending signals of quality and express less uncertainty in their communications will enjoy better financing outcomes. However, we argue that in situations characterized by high unknowability, and where founders do not have a significant knowledge advantage over investors (i.e., when there is Knightian uncertainty), firms that acknowledge this unknowability by expressing more uncertainty in their communications will have more favorable financing outcomes. Studying the full population of special purpose acquisition companies (SPACs) that sought to complete an initial public offering from the emergence of the sector in 2003–2019, we find support for our predictions. This study expands our understanding of the role of uncertainty in investment decisions, offers deeper insight into how language operates in financial markets, and sheds light on the increasingly popular, but understudied, SPAC vehicle. Funding: Ivana Naumovska received financial support from the INSEAD R&D Committee and the INSEAD Dean’s Annual Fund. Supplemental Material: The online appendix is available at https://doi.org/10.1287/stsc.2022.0043 .

show abstract

Rhetoric, Risk, and Investment: Letting the Numbers Speak for Themselves

Cited by 5 publications

References 86 publications

Ambiguous Signals and Information Asymmetry in the Initial Public Offering Process: Examining Ownership Concentration, Process Time, and Underpricing

Ambiguous Signals and Information Asymmetry in the Initial Public Offering Process: Examining Ownership Concentration, Process Time, and Underpricing

Mapping the signaling environment between sustainability‐focused entrepreneurship and investment inputs: A topic modeling approach

Communication under Uncertainty and the Role of Founders’ Information Advantage: Evidence from SPAC IPOs

Contact Info

Product

Resources

About