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27-11-2023

Manager sentiment, stock return, and the evolving information environment in post-IPO firms

Authors: Yixi Ning, Sean Yang, Zhiwen Xiao

Published in: Journal of Economics and Finance

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Abstract

This study examines the evolving information environment in a sample of post-IPO firms from 2010 to 2020 by exploring the relationship between firm-level manager sentiments and excess buy-and-hold stock returns. We confirm that there is a negative relationship between the full-text manager sentiment and the long-term excess buy-and-hold returns from 1 to 12 months after corporate filings. However, there is no positive association between manager sentiment and contemporaneous (e.g., 4-day) event-window announcement returns as documented in prior studies. The mispricing effect captured by the firm-level manager sentiment is less severe in the later years post IPOs, indicating the degree of information asymmetry is a dynamic phenomenon as the firms become more established over time. We also find the manager sentiment from the section of Management Discussion and Analysis (MD&A) is less optimistic about the firm performance than the full-text manager sentiment, and there is no mispricing effect of the MD&A manager sentiment on stock returns. These findings shed valuable insights on the dynamic information environment in the post-IPO firms from a unique perspective.

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Appendix
Available only for authorised users
Footnotes
1
There are some missing values for manager sentiments from the (MD&A) section of corporate fillings, so the number of observations is 7,574 in Table 7, which is slightly less than 7,595 observations for the full-text manager sentiments used in Tables 4 and 5.
 
2
As robustness tests, we use Non-MD&A Manager Sentiment to replace Full-text Manager Sentiment in all five models in Table 7, and we find the estimated coefficients and the significant levels are quantitatively similar.
 
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Metadata
Title
Manager sentiment, stock return, and the evolving information environment in post-IPO firms
Authors
Yixi Ning
Sean Yang
Zhiwen Xiao
Publication date
27-11-2023
Publisher
Springer US
Published in
Journal of Economics and Finance
Print ISSN: 1055-0925
Electronic ISSN: 1938-9744
DOI
https://doi.org/10.1007/s12197-023-09653-8