IDEAS home Printed from https://ideas.repec.org/a/gam/jjrfmx/v14y2021i10p456-d641597.html
   My bibliography  Save this article

The Rich Get Richer and the Poor Get Poorer: Social Media and the Post-IPO Behavior of Investors in Biotechnology Firms: The Relationship with Twitter Volume

Author

Listed:
  • Smadar Siev

    (Faculty of Business Administration, Haifa Campus Port Gate Building, Ono Academic College, HaNamal 32, Haifa 3303201, Israel)

Abstract

This paper analyzes stock returns for biotechnology firms after initial public offering (IPO) and explores the effect of social media—specifically, Twitter—on these returns. The results indicate positive yet insignificant cumulative average abnormal returns (CAARs) of 1.97% in the first 25 days post-IPO and a decline of tens of percentage points over the following three years. However, after dividing the sample firms into two subsamples according to size, either under or over USD 500 million in market value, the overall results change dramatically. Firms with a market value lower than USD 500 million yield negative CAARs immediately following the IPO; however, this negative CAAR becomes significant only from day 50 onward. Firms with a market value over USD 500 million yield positive CAARs immediately following the IPO, which become significant from day 50, remaining so throughout the following year. These findings can be attributed to the limited duration of investors’ attention, which increases until the end of quiet period and, with small-sized firms, diminishes during the post-IPO years. An examination of Twitter activity and share returns demonstrates a robust correlation between the two, suggesting that investors’ attention to firms may be reflected in their Twitter usage.

Suggested Citation

  • Smadar Siev, 2021. "The Rich Get Richer and the Poor Get Poorer: Social Media and the Post-IPO Behavior of Investors in Biotechnology Firms: The Relationship with Twitter Volume," JRFM, MDPI, vol. 14(10), pages 1-17, September.
    • Handle: RePEc:gam:jjrfmx:v:14:y:2021:i:10:p:456-:d:641597
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1911-8074/14/10/456/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/1911-8074/14/10/456/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Re-Jin Guo & Nan Zhou, 2016. "Innovation capability and post-IPO performance," Review of Quantitative Finance and Accounting, Springer, vol. 46(2), pages 335-357, February.
    2. Jay R. Ritter & Ivo Welch, 2002. "A Review of IPO Activity, Pricing, and Allocations," Journal of Finance, American Finance Association, vol. 57(4), pages 1795-1828, August.
    3. Unknown, 2014. "Media Coverage 2014," 2014: Ethics, Efficiency and Food Security: Feeding the 9 Billion, Well, 26-28 August 2014 225573, Crawford Fund.
    4. Goergen, Marc & Khurshed, Arif & Renneboog, Luc, 2009. "Why are the French so different from the Germans? Underpricing of IPOs on the Euro New Markets," International Review of Law and Economics, Elsevier, vol. 29(3), pages 260-271, September.
    5. Mello, Antonio S. & Parsons, John E., 1998. "Going public and the ownership structure of the firm," Journal of Financial Economics, Elsevier, vol. 49(1), pages 79-109, July.
    6. Yan Gao & Connie X. Mao & Rui Zhong, 2006. "Divergence Of Opinion And Long‐Term Performance Of Initial Public Offerings," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 29(1), pages 113-129, March.
    7. Lily Fang & Joel Peress, 2009. "Media Coverage and the Cross‐section of Stock Returns," Journal of Finance, American Finance Association, vol. 64(5), pages 2023-2052, October.
    8. Dambra, Michael & Field, Laura Casares & Gustafson, Matthew T., 2015. "The JOBS Act and IPO volume: Evidence that disclosure costs affect the IPO decision," Journal of Financial Economics, Elsevier, vol. 116(1), pages 121-143.
    9. Re-Jin Guo & Nan Zhou, 2016. "Innovation capability and post-IPO performance," Review of Quantitative Finance and Accounting, Springer, vol. 46(2), pages 335-357, February.
    10. Smadar Siev, 2014. "The PR Premium," Journal of Behavioral Finance, Taylor & Francis Journals, vol. 15(1), pages 43-55, January.
    11. Loughran, Tim & Ritter, Jay R, 1995. "The New Issues Puzzle," Journal of Finance, American Finance Association, vol. 50(1), pages 23-51, March.
    12. Luigi Zingales, 1995. "Insider Ownership and the Decision to Go Public," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 62(3), pages 425-448.
    13. Hailiang Chen & Prabuddha De & Yu (Jeffrey) Hu & Byoung-Hyoun Hwang, 2014. "Wisdom of Crowds: The Value of Stock Opinions Transmitted Through Social Media," The Review of Financial Studies, Society for Financial Studies, vol. 27(5), pages 1367-1403.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Dominika Gajdosikova & Katarina Valaskova & Tomas Kliestik & Maria Kovacova, 2023. "Research on Corporate Indebtedness Determinants: A Case Study of Visegrad Group Countries," Mathematics, MDPI, vol. 11(2), pages 1-30, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. HONJO Yuji & KURIHARA Koki, 2021. "Graduation of Initial Public Offering Firms from Junior Stock Markets: Evidence from the Tokyo Stock Exchange," Discussion papers 21049, Research Institute of Economy, Trade and Industry (RIETI).
    2. Jean Helwege & J. Nellie Liang, 2003. "Initial public offerings in hot and cold markets," Finance and Economics Discussion Series 2003-04, Board of Governors of the Federal Reserve System (U.S.).
    3. Panos N. Patatoukas & Richard G. Sloan & Annika Yu Wang, 2022. "Valuation Uncertainty and Short-Sales Constraints: Evidence from the IPO Aftermarket," Management Science, INFORMS, vol. 68(1), pages 608-634, January.
    4. Yuji Honjo & Koki Kurihara, 2023. "Graduation of initial public offering firms from junior stock markets: evidence from the Tokyo Stock Exchange," Small Business Economics, Springer, vol. 60(2), pages 813-841, February.
    5. Greene, Daniel, 2016. "The wealth of private firm owners following reverse mergers," Journal of Corporate Finance, Elsevier, vol. 37(C), pages 56-75.
    6. Bill Francis & Iftekhar Hasan & Dona Siregar, 2009. "The choice of IPO versus M&A: evidence from banking industry," Applied Financial Economics, Taylor & Francis Journals, vol. 19(24), pages 1987-2007.
    7. Helwege, Jean & Packer, Frank, 2009. "Private matters," Journal of Financial Intermediation, Elsevier, vol. 18(3), pages 362-383, July.
    8. Xie, Xiaoying, 2010. "Are publicly held firms less efficient? Evidence from the US property-liability insurance industry," Journal of Banking & Finance, Elsevier, vol. 34(7), pages 1549-1563, July.
    9. Chan, Yue-Cheong, 2014. "How does retail sentiment affect IPO returns? Evidence from the internet bubble period," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 235-248.
    10. Ren, Siewan & Wright, Anna & Wyatt, Anne, 2012. "Stock option use by Australian IPOs," Journal of Contemporary Accounting and Economics, Elsevier, vol. 8(1), pages 1-22.
    11. Anderson, Christopher W. & Huang, Jian & Torna, Gökhan, 2017. "Can investors anticipate post-IPO mergers and acquisitions?," Journal of Corporate Finance, Elsevier, vol. 45(C), pages 496-521.
    12. Espenlaub, Susanne & Goyal, Abhinav & Mohamed, Abdulkadir, 2020. "The impact of shareholders and creditors rights on IPO performance: An international study," The British Accounting Review, Elsevier, vol. 52(1).
    13. Lubos Pastor & Pietro Veronesi, 2003. "Stock Prices and IPO Waves," NBER Working Papers 9858, National Bureau of Economic Research, Inc.
    14. Richard J. Rosen & Scott B. Smart & Chad J. Zutter, 2005. "Why do firms go public? evidence from the banking industry," Working Paper Series WP-05-17, Federal Reserve Bank of Chicago.
    15. Carey, Peter & Fang, Victor & Zhang, Hong Feng, 2016. "The role of optimistic news stories in IPO pricing," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 41(C), pages 16-29.
    16. Domonkos F. Vamossy, 2023. "Social Media Emotions and IPO Returns," Papers 2306.12602, arXiv.org, revised Apr 2024.
    17. Garg, Roshni & Shukla, Abha, 2024. "Sovereign wealth funds as anchor investors in IPOs: Evidence from India," Pacific-Basin Finance Journal, Elsevier, vol. 86(C).
    18. Bajo, Emanuele & Chemmanur, Thomas J. & Simonyan, Karen & Tehranian, Hassan, 2016. "Underwriter networks, investor attention, and initial public offerings," Journal of Financial Economics, Elsevier, vol. 122(2), pages 376-408.
    19. Kim, Woojin & Weisbach, Michael S., 2008. "Motivations for public equity offers: An international perspective," Journal of Financial Economics, Elsevier, vol. 87(2), pages 281-307, February.
    20. Helbing, Pia, 2019. "A review on IPO withdrawal," International Review of Financial Analysis, Elsevier, vol. 62(C), pages 200-208.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jjrfmx:v:14:y:2021:i:10:p:456-:d:641597. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.