The Impact Of Market Feedback On Post-IPO Capital Expenditures
- Topics:
- IPO
- Tags:
- Feedback,
- Finance,
- Financial Planning,
- Financial Services,
- Investment,
- IPO,
- University Of Leeds
- Source:
- University of Leeds
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Overview: Initial Public Offerings (IPO) are suitable events to test the importance of market sentiment on managerial decision making. Using a sample of 185 initial public offerings of equity in the UK, a trading environment dominated by financial institutions, this paper empirically show that the market reaction at the issue date a effects firms' subsequent level of capital investment. In particular, IPOs with the most negative feedback have abnormal scaled investment levels that are ten times lower than comparable IPOs with more favorable feedback. Over the longer term, there is evidence of a post-IPO drift in returns for those firms with the most negative market reaction on the issue date. The results provide evidence that managers take market feedback into account when making investment decisions.
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Format: PDF | Size: 425KB | Date: Jun 2005 | Pages: 31
