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Managerial confidence and initial public offerings

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  • Boulton, Thomas J.
  • Campbell, T. Colin

Abstract

Information asymmetry may act as a catalyst for an association between managerial confidence and initial public offering (IPO) outcomes. This could occur if overconfident managers overinvest in producing information prior to going public, time offerings during periods when disagreement between managers and investors is low, or attempt to signal their beliefs to less informed market participants. Our evidence suggests that highly overconfident managers attempt to use underpricing to signal their beliefs to the market in an unsuccessful effort to receive greater value for their shares in follow-on offerings. This further suggests managerial overconfidence can be harmful to the firm.

Suggested Citation

  • Boulton, Thomas J. & Campbell, T. Colin, 2016. "Managerial confidence and initial public offerings," Journal of Corporate Finance, Elsevier, vol. 37(C), pages 375-392.
    • Handle: RePEc:eee:corfin:v:37:y:2016:i:c:p:375-392
    DOI: 10.1016/j.jcorpfin.2016.01.015
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    2. Dimitrios Gounopoulos & Georgios Loukopoulos & Panagiotis Loukopoulos, 2021. "CEO education and the ability to raise capital," Corporate Governance: An International Review, Wiley Blackwell, vol. 29(1), pages 67-99, January.
    3. Khurshed, Arif & Kostas, Dimitris & Mohamed, Abdulkadir & Saadouni, Brahim, 2018. "Initial public offerings on the UK when-issued market," Journal of Corporate Finance, Elsevier, vol. 49(C), pages 1-14.
    4. MinChung Kim & Guiyang Xiong & Kwang-Ho Kim, 2018. "Where does pride lead? Corporate managerial hubris and strategic emphasis," Journal of the Academy of Marketing Science, Springer, vol. 46(3), pages 537-556, May.
    5. Helbing, Pia & Lucey, Brian M. & Vigne, Samuel A., 2019. "The determinants of IPO withdrawal – Evidence from Europe," Journal of Corporate Finance, Elsevier, vol. 56(C), pages 415-436.
    6. Danso, Albert & Lartey, Theophilus & Amankwah-Amoah, Joseph & Adomako, Samuel & Lu, Qinye & Uddin, Moshfique, 2019. "Market sentiment and firm investment decision-making," International Review of Financial Analysis, Elsevier, vol. 66(C).
    7. Kyung-Hee Park & Jinho Byun & Paul Moon Sub Choi, 2019. "Managerial Overconfidence, Corporate Social Responsibility Activities, and Financial Constraints," Sustainability, MDPI, vol. 12(1), pages 1-14, December.
    8. Latino, Carmelo, 2023. "Surfing the green wave: What's in a "green" name change?," SAFE Working Paper Series 410, Leibniz Institute for Financial Research SAFE.
    9. Helbing, Pia, 2019. "A review on IPO withdrawal," International Review of Financial Analysis, Elsevier, vol. 62(C), pages 200-208.
    10. Liu, Yongda & Padgett, Carol & Yin, Chao, 2022. "Internal information quality and financial policy peer effects," International Review of Financial Analysis, Elsevier, vol. 84(C).
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    13. Akyildirim, Erdinc & Corbet, Shaen & Sensoy, Ahmet & Yarovaya, Larisa, 2020. "The impact of blockchain related name changes on corporate performance," Journal of Corporate Finance, Elsevier, vol. 65(C).

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    More about this item

    Keywords

    Initial public offering (IPO); Managerial confidence; Underpricing;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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