A Textual Analysis of Logograms in Chinese IPO Roadshows: How Agreement between Investors and Management Relates to Pricing and Performance

We analyze the interaction between management and investors during Chinese IPO roadshows through Jaccard Similarity analysis of written Chinese logograms. We provide evidence that when agreement is high, investor optimism increases, leading to relatively large first-day underpricing. We further show...

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Bibliographic Details
Published in:International journal of financial studies 2022-04, Vol.10 (2), p.25
Main Authors: Brau, James C., Cicon, James, Owen, Stephen R.
Format: Article
Language:English
Subjects:
Agreements
Asymmetry
Communication
Content analysis
Dictionaries
Economics
Hypotheses
Initial public offerings
Investments
IPO
IPO underpricing
Literature reviews
Readability
Text analysis
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Summary:We analyze the interaction between management and investors during Chinese IPO roadshows through Jaccard Similarity analysis of written Chinese logograms. We provide evidence that when agreement is high, investor optimism increases, leading to relatively large first-day underpricing. We further show that high agreement biases investors to systematically overestimate IPO prospects leading to poor long-run abnormal performance. Jaccard Similarity is different from current content analysis methodologies because it is language and culture agnostic, requiring no a priori construction of thematic dictionaries. Elimination of such dictionaries removes the danger that the researcher has imposed predispositions upon the study.
ISSN:2227-7072
2227-7072
DOI:10.3390/ijfs10020025