Worth Love? Narcissism and IPO Underpricing
Using hand-collected data on the signature size of managers among Chinese initial public offerings (IPOs) from 2007 to 2019 to proxy for managerial narcissism, we examine how IPOs with narcissistic managers (narcissistic IPOs) impact IPO underpricing. The findings suggest that narcissistic IPOs have higher underpricing than non-narcissistic IPOs. Specifically, we find a narcissistic IPO, on average, exhibits approximately 11.3% higher underpricing than a median IPO firm. Our results are robust to alternative metrics of narcissism and underpricing after controlling endogeneity. Additional analyses suggest that narcissistic IPOs are more likely to engage in earnings management than non-narcissistic IPOs pre-IPO. The former exhibit excessive risk-taking behavior gauged by earnings volatility pre-IPO and higher beta post-IPO than the latter. In the cross-sectional analyses, we document that the impact of managerial narcissism on IPO underpricing is more salient for IPOs facing unsophisticated IPO investors, in a high market sentiment, or having poor corporate governance
Year of publication: |
2022
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Authors: | He, Jie ; Zhang, Linlang ; Li, Changwei ; Chan, Kam C. |
Publisher: |
[S.l.] : SSRN |
Saved in:
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