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Conscientiousness and IPO first-day underpricing

Author

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  • Chen, Shirley (Shuo)
  • Meng, Chong

Abstract

We document that state-level conscientiousness is negatively associated with the initial public offering (IPO) first-day return. Exploring the economic mechanisms, we find that IPO firms originating in states that have a high level of conscientiousness experience longer IPO processes and hire more, but less reputable underwriters. Furthermore, issuers in highly conscientious states are less inclined to exchange IPO first-day return for coverage by all-star analysts. Our findings suggest that high conscientiousness stimulates issuers' negotiation incentives towards underwriters. These findings highlight state-level personality traits as a crucial determinant of IPO market pricing dynamics.

Suggested Citation

  • Chen, Shirley (Shuo) & Meng, Chong, 2024. "Conscientiousness and IPO first-day underpricing," Finance Research Letters, Elsevier, vol. 65(C).
    • Handle: RePEc:eee:finlet:v:65:y:2024:i:c:s1544612324005804
    DOI: 10.1016/j.frl.2024.105550
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    More about this item

    Keywords

    Initial public offerings (IPOs); First-day return; Big five; Personality traits;
    All these keywords.

    JEL classification:

    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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