University of Cincinnati Lindner College of Business

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Managerial Confidence and Initial Public Offerings

Author(s): Thomas Boulton, Timothy Campbell

Status: Published
Year: 2016
Publication Name: Journal of Corporate Finance
Volume: 37, Page Number(s): 375-392


Abstract

Information asymmetry may act as a catalyst for an association between managerial confidence and initial public offering (IPO) outcomes. This could occur if overconfident managers overinvest in producing information prior to going public, time offerings during periods when disagreement between managers and investors is low, or attempt to signal their beliefs to less informed market participants. Our evidence suggests that highly overconfident managers attempt to use underpricing to signal their beliefs to the market in an unsuccessful effort to receive greater value for their shares in follow-on offerings. This further suggests managerial overconfidence can be harmful to the firm.


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