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IPO first-day returns, offer price revisions, volatility, and form S-1 language

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  • Loughran, Tim
  • McDonald, Bill

Abstract

Form S-1 is the first SEC filing in the initial public offering (IPO) process. The tone of the S-1, in terms of its definitiveness in characterizing the firm’s business strategy and operations, should affect investors’ ability to value the IPO. We find that IPOs with high levels of uncertain text have higher first-day returns, absolute offer price revisions, and subsequent volatility. Our findings provide empirical evidence for the theoretical models of uncertainty, bookbuilding, and prospect theory.

Suggested Citation

  • Loughran, Tim & McDonald, Bill, 2013. "IPO first-day returns, offer price revisions, volatility, and form S-1 language," Journal of Financial Economics, Elsevier, vol. 109(2), pages 307-326.
    • Handle: RePEc:eee:jfinec:v:109:y:2013:i:2:p:307-326
    DOI: 10.1016/j.jfineco.2013.02.017
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    More about this item

    Keywords

    IPOs; First-day returns; Bookbuilding; S-1 filings; Textual analysis;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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