Does CEO celebrity affect IPO underpricing? Evidence from the strategic emerging industries in China
Abstract
Purpose
The interaction between evaluators is underestimated in legitimacy literature. This study aims to examine the impact of CEO celebrity on initial public offerings (IPOs) underpricing in Strategic Emerging Industries (SEIs). Based on legitimacy and limited attention effect, this study introduces a new antecedent to the asset pricing literature under a particular sample.
Design/methodology/approach
This paper illustrates how CEO celebrity promotes IPO underpricing by enhancing the legitimacy and then explores how the CEO characteristics can moderate this relationship. Using 1,128 IPO companies in China SEIs from 2010 to 2019, cross-section data is used to build a multiple linear regression model to test the hypotheses.
Findings
The result indicates that CEO celebrity is positively related to IPO underpricing. Founder CEO and CEO duality amplify the relationship. Further analysis shows that the relationship between CEO celebrity and IPO underpricing is more pronounced in firms with high Baidu search and low market sentiment.
Originality/value
This study provides insights into how CEO celebrity as notable internal information shapes the formation of investors' preliminary impressions of firms. The evidence consists of legitimacy and limited attention perspective by showing how investors favor, follow and hype the stocks with celebrity CEOs. The results extend the knowledge about how CEO characteristics influence information frictions in asset pricing during IPO.
Keywords
Acknowledgements
Funding: This work was supported by the [National Natural Science Foundation of China] under Grant [number 71802041; 72002064; 71801034].
Citation
Yang, S., Zhao, Y. and Wu, C. (2023), "Does CEO celebrity affect IPO underpricing? Evidence from the strategic emerging industries in China", International Journal of Emerging Markets, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/IJOEM-12-2022-1815
Publisher
:Emerald Publishing Limited
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