Trademarks as Value Investment : Evidence from US IPOs

We examine the impact of trademarks (TMs) on the initial public offering (IPO) valuation process of firms, their future performance, and capital market resilience. We find that TMs play an ambivalent role in under-pricing, depending on their quality. The existence of TMs tends to increase under-pricing, while a high-quality trademark portfolio has the opposite effect. For firms in the service sector, where intangible assets dominate, TMs exhibit a greater influence on under-pricing. Results are robust to a battery of tests, including propensity score matching and instrumental variable analysis. After the IPO, we find that firms with TM activity prior to their listing on average perform better than expected as evidenced by i) their abnormal returns following the IPO and ii) a lower hazard of being de-listed from organized exchanges. Our results call for increased disclosure of TM activity by firms to reduce under-pricing and therefore 'money left on the table’