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Cost of IPOs, IPO dynamics in the short and long-run and value of textual tone of IPO prospectus

Alzamel, Mazen (2016) Cost of IPOs, IPO dynamics in the short and long-run and value of textual tone of IPO prospectus. PhD thesis, University of York.

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Abstract

This thesis is an attempt to understand few aspects of the initial public offerings (IPO) market using the data from the London Stock Exchange (LSE) for both the Main Market (MM) and the Alternative Investment Market (AIM) segments. I examined the cost of raising money for the IPOs. I found that IPO spread is in the range of 4% - 6.43% and a median of 5%, which contrasts with previous US studies that report a spread of 7%. More interestingly, there is no clustering of fees at any level in the LSE. Economies of scale explain the spread charged in the AIM better than the MM, implying the spread decreases when the proceed increases. As the final product of the IPO preparation stage is the IPO prospectus, I conducted a textual analysis to measure the tones’ relationship with IPO short-run and long-run dynamics. I used a novel methodology of analysis the textual tone from the IPO prospectus utilising Loughrun and McDonald (2011) modified word list. I found that IPO tone is related to underpricing, spread and lockup length. However, I did not find any relationship with the volatility or idiosyncratic risk. That may be due to the fact that these are not useful measures of ex-ante uncertainty. I also examined some of the long-run anomalies in the IPO literature. The tone measures show a significant relationship with the survival of the firms and time till dead. I showed that the information disclosed at the time of IPO is still valid for predicting the survival of IPO firms. However, I do not find much correlation with the IPO tone measures and lockup expiration returns and long-run IPO performance. That might be a result of methodological controversies of measuring the long-run performance of the IPO. JEL Code: G14, G15, G24, G30, G32

Item Type: Thesis (PhD)
Keywords: AIM, Main market, London Stock Exchange, Underwriters spread, IPOs, lockup, underpricing, risk, Underpricing, spread, lockup length, volatility, idiosyncratic risk, Textual analysis, Lockup expiration returns, long-run IPO performance, survival analysis
Academic Units: The University of York > The York Management School
Identification Number/EthosID: uk.bl.ethos.703381
Depositing User: Mr Mazen Alzamel
Date Deposited: 14 Feb 2017 11:39
Last Modified: 24 Jul 2018 15:21
URI: http://etheses.whiterose.ac.uk/id/eprint/16169

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