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How does corporate culture affect IPO price formation?

Author

Listed:
  • Cumming, Douglas
  • Köchling, Gerrit
  • Neukirchen, Daniel
  • Posch, Peter N.

Abstract

We examine the relationship between corporate culture and initial public offering (IPO) price formation. Using a sample of 935 US IPOs and data on corporate culture from Li et al. (2021b), we find that IPOs of strong culture firms are associated with more positive price revisions and higher initial returns, i.e., more underpricing. These findings hold using an alternative measure of corporate culture, matched samples, and a large set of control variables. Consistent with key theories, the effects appear to be driven by underwriters deliberately compensating investors for revealing information about their perceptions of the firm's culture during bookbuilding.

Suggested Citation

  • Cumming, Douglas & Köchling, Gerrit & Neukirchen, Daniel & Posch, Peter N., 2024. "How does corporate culture affect IPO price formation?," Journal of Banking & Finance, Elsevier, vol. 163(C).
    • Handle: RePEc:eee:jbfina:v:163:y:2024:i:c:s0378426624000785
    DOI: 10.1016/j.jbankfin.2024.107158
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    More about this item

    Keywords

    Initial public offering; Corporate culture; Underpricing; Price revision;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • Z10 - Other Special Topics - - Cultural Economics - - - General

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