Attention-grabbing IPOs in early stages for IT firms: An empirical analysis of post-IPO performance

Abstract

This study uncovers the role of IPO underpricing and its interplay with investor attention by examining post-IPO performance in the short and long runs. Our results suggest that on average, IT firms are underpriced more severely than non-IT firms and receive more attention measured as Google searches around their IPO dates. After controlling for potential endogeneity, we also show that investor attention is positively associated with underpricing for IT firms but not for non-IT firms. Given that underpricing continues to exert influence on investor attention over periods, the impact of investor attention is pronounced and prolonged over a longer-time horizon for IT firms when their IPO is underpriced. However, the result does not hold for non-IT firms. Overall, our study makes distinctive contributions by uncovering the underlying reason of severe underpricing observed in IT firms and examining its interplay with investor attention in shaping both short- and long-run performance.