1,721,009 research outputs found
Family firm local involvement and the Local Home Bias phenomenon
Full text linkResearch has documented that most of retail and institutional investors exhibit a strong preference for stocks issued by nearby listed firms (i.e. Local Home Bias). This phenomenon shapes corporate market value and the cost of funding. In this paper, we investigate whether the Local Home Bias is enhanced in family firms as a consequence of their symbiotic connection with the local community. Using a dataset of 2,951 Italian firm-year observations (1,481 are family firms) over the period 1999e2011, we find that Local Home Bias is not a widespread phenomenon and mainly occurs in founding family firms where the founder serves as CEO. The Local Home Bias is absent in non-family firms or in family firms where the owner has acquired control through a market transaction. Overall, results suggest that locally committed family firms trigger investor preference for local stocks and, in doing so, exploit the dedicated local clientele which shrinks the cost of funding. Ultimately, we argue the social contributions of family firms to the local community could even have opportunistic traits and a non-trivial economic effect
The Geography of Investor Attention
Full text linkLocal companies attract significantly more attention from investors than nonlocal companies, especially at times of news releases and high volatility. This attention gap widens especially when news is firm-specific rather than aggregate, and in response to idiosyncratic rather than market risk. Attention is causally related to perceived proximity: after a firm is acquired by a nonlocal one, local investors, compared with nonlocal investors, are more likely to reallocate attention away from it; conversely, COVID-19 travel restrictions led investors to reallocate attention toward local companies and away from nonlocal ones, especially those difficult to reach. Finally, local attention predicts volatility, bid-ask spreads, and nonlocal attention, but not vice versa. Our findings suggest that the geography of attention matters and is shaped by local investors' information-processing advantage, not familiarity bias. (JEL D83, G11, G12, G14, L86, R32)Received: 2 January 2024; Editorial decision: 13 March 2024 Editor: Isil Erel Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online
Does the earnings quality matter? Evidence from a quasi-experimental setting
Full text linkInvestor preference for local stocks provides a quasi-experimental setting to investigate whether the market rewards firms that comply with generally accepted accounting principles. We show firms with low earnings quality trade at a premium compared to firms in compliance with accounting principles; the difference in values is greater when the role of local investor over-trading is stronger in stock price-formation, in other words for the more isolated firms. The value of the information not conveyed to the market through accounting disclosure accounts for 30% of the market-to-book. Results are robust to earnings quality definition, and show while non-local investors are sensitive to the quality of accounting information, local and better-informed investors are not. Overall, accounting\ud
quality matters
La sensibilità azionaria alle variazioni dei tassi di interesse: un tentativo di stima della Duration Equity dell'indice di mercato italiano
No full textIl presente lavoro è diretto a fornire una stima dell'equity duration con riferimento al mercato azionario italiano attraverso l'utilizzo di due approcci metodologici differenti. Il primo si basa sulla formulazione derivante dal Dividend discount Model di Gordon e Shapiro (1965), di cui si sviluppa anche una possibile estensione utile per il suo utilizzo empirico. Il secondo approccio si basa invece sull'utilizzo dell'nterpretazione della duration equity quale misura di sensibilità alle variazioni dei tassi di interesse. Con riferimento a quest'ultima metodologia, è stata anche introdotta un'analisi delle componenti principali al fine di distinguere gli effetti sull'indice azionario dei diversi possibili movimenti della struttura a termine dei tassi di interesse: più specificatamente, movimenti paralleli, di inclinazione e di curvatura. A nostra conoscenza questo è il primo studio volto ad analizzare tali relazioni nel contesto del mercato azionario italiano
IPO a ondate: Cluster temporali o cluster locali?
Full text linkThis paper investigates the relation between the success of initial public offerings in a given region and the subsequent volume of IPOs in the same region. We find that a high local performance of IPOs is able to trigger a local IPO wave due to private firms’ attempt to exploit the favorable local market conditions. Results are robust to the definition of local IPO success, which is addressed using several measures such as the average regional underpricing or the excess demand for newly issued securities. Empirical findings show that the well-documented temporal IPO waves are indeed local IPO waves
Geographic Influences on IPO
No full textLiterature on IPOs is more and more challenging. Recent research looks at IPOs as phenomena connected with the surrounding environment (e.g., Braun and Larrain, 2009; Hsu et al., 2010). We contribute to this literature by testing whether the firm geographic location matters in IPOs. Our key conjecture is that listed firm clustering around the IPO headquarters i) decreases the likelihood to go public, ii) lowers the underpricing, and iii) boosts the long-run under-performance. These conjectures are motivated by previous research showing that i) retail investors exhibit a preference for local stocks (Local Home Bias, LHB) (e.g., Coval and Moskowitz, 1999), ii) the proximity to the issuing firm reduces outsider information gaps (e.g., Feng and Seasholes, 2004), and iii) the LHB boosts corporate market price (e.g., Hong et al., 2008). To test these conjectures we merge datasets on the Italian private firms (95,745 firm-year observations), listed firms (3,835), and non-financial IPOs (157) over 1999-2012. We capture firm clustering around the IPO by introducing a spatial clustering index based on the harmonic mean of distances between each IPO and the other firms. As predicted, we find firm clustering around the IPO decreases the likelihood to go public, lowers the underpricing, and boosts the long-run underperformance. We control for local wealth, endogeneity, self-selection bias, information asymmetries and the complexity of the price-setting process.
Our findings highlight that the firm location matters in IPOs. The firm location affects almost every aspect of the corporate finance such as equity issuance (Loughran, 2008), financial structure (Gao et al., 2011), and payout policy (Becker et al., 2011), among others; we first relate to this literature. Our findings also provide evidence on underwriters’ valuation skills. When attempting to price an IPO, the main problem issuers and investment banks face is the estimation of the aggregate demand (e.g., Lowry and Schwert, 2004). Our results further support this evidence. The complexity of the pricing problem increases in isolated firms because of the LHB which makes additionally relevant the local supply and demand for local stocks. Indeed, the LHB seems implemented in the price-setting process; however, the offer price is not properly adjusted, and isolated IPOs are more underpriced than clustered IPOs. The more reliable explanation is that underwriters fail to estimate the firm value related to the firm location. The main implication would be that a location factor should be included in IPO pricing
The decision to go public and the IPO underpricing with locally biased investors
No full textWe provide new evidence that local investors are peculiarly biased towards local IPO stocks. Taking the well-known investor preference for local stocks a step further, we contribute by showing that local IPOs boost stock market participation far more intensely than local listed firms. Interestingly, the effect is driven by individuals born and raised in the region, having zero effect for those who have moved to the area. Consistent with underwriters significantly under-estimating the local investors’ demand in local IPOs, the probability of a private firm to go public, the IPO underpricing and the cross-sectional volatility of IPO initial returns, increase in remote firms where the local investors’ demand in local IPOs is particularly high. Overall, our results suggest that local investors are crucial for the IPO decision
La Duration Equity delle Diverse Categorie di Azioni: un Futuro per le Azioni di Risparmio?
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