Effective Signals: How Can Firms Communicate Their Strategic Intent in IPO Communications?

摘要

An initial public offering (IPO) can be a risky investment. That's certainly the case for the individual investor, who can find it difficult to predict the potential value of the firm. Part of the challenge in determining fair market value in an IPO, of course, is the newness of the firm to the market. Not surprisingly, this valuation process is filled with uncertainty due to information asymmetry between informed and uninformed investors. As a consequence, we often hear mixed stories in the business press about IPO firms, from Cinderella predictions to tales of potential shipwrecks. Only credible communication of corporate strategies can help investors better understand the capabilities and value of the firm. So how can information asymmetry in IPO firms be addressed? How can the strategic capabilities of IPO firms be communicated effectively to individual investors? And what are possible information cues that could signal these capabilities?