Research Seminar
“One News, Many Views: Strategy, Investor Disagreement on Social Media, and Consequences for Ventures Going Public” - Mr. Sayan Sarkar
| Abstract: | Evaluating an investment opportunity entails making decisions under uncertainty. If the future is inherently uncertain, not all investors will converge to an identical investment decision. While management research explains how investors respond - on average - to a wide range of factors, including the strategy disclosed by firms, it has generally overlooked how investors might come to disagree in response to such information. Investor disagreement matters insofar it determines several facets of financial-market performance, such as IPO underpricing, long-term stock price change, reaction to bad earnings news, and the cost of capital. I harness the research opportunity to examine how characteristics of firm strategy might determine the extent of investor disagreement in the context of going public. I argue that investor disagreement will be high when the strategy disclosed by a firm undergoing an IPO has high (a) imbalance between information about strategy and environment factors, (b) novelty vs peers and (c) degree of contingency projected in its plans. I find support for my predictions after analyzing disagreement using a novel measure based on tweets posted to an investor-focused social-media platform during 577 US IPOs during 2015-2019. Notably, using social-media data delivers empirical advantages over traditional disagreement proxies (e.g. trading volume) available to scholars as it helps pinpoint investor evaluations (a) disentangled form extraneous investment considerations such as tax and liquidity, (b) inclusive of pessimistic or abstaining investors, and (c) in real-time. The paper informs extant knowledge on (a) financial resource acquisition and (b) investor response to uncertainty. |
| Date: | Oct 12 (Mon), 2020 3:30 pm - 4:45 pm |
| Time: | 3:30PM - 4:45PM |
| Venue: | ZOOM |
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