Manager sentiment, stock return, and the evolving information environment in post-IPO firms

This study examines the evolving information environment in a sample of post-IPO firms from 2010 to 2020 by exploring the relationship between firm-level manager sentiments and excess buy-and-hold stock returns. We confirm that there is a negative relationship between the full-text manager sentiment and the long-term excess buy-and-hold returns from 1 to 12 months after corporate filings. However, there is no positive association between manager sentiment and contemporaneous (e.g., 4-day) event-window announcement returns as documented in prior studies. The mispricing effect captured by the firm-level manager sentiment is less severe in the later years post IPOs, indicating the degree of information asymmetry is a dynamic phenomenon as the firms become more established over time. We also find the manager sentiment from the section of Management Discussion and Analysis (MD&A) is less optimistic about the firm performance than the full-text manager sentiment, and there is no mispricing effect of the MD&A manager sentiment on stock returns. These findings shed valuable insights on the dynamic information environment in the post-IPO firms from a unique perspective.