Perceptions and Price: Evidence from CEO Presentations at IPO Roadshows

By Elizabeth BlankespoorGreg MillerBrad Hendricks
2015| Working Paper No. 3253

This paper examines how investor perceptions of management influence firm valuation. We develop a composite measure of investor perception using 30-second content-filtered video clips of initial public offering (IPO) roadshow presentations. We show that this measure, designed to capture viewers’ first impressions of a CEO’s competence, trustworthiness, and attractiveness, is positively associated with an IPO firm’s secondary market value, even after controlling for traditional determinants of firm value. We also show that this information about management is positively related to underwriter matching. Finally, we examine components of IPO price formation and find that our composite measure of perception is positively associated with both the price proposed for the offering and the price revision that occurs from this proposed price to the closing price on the firm’s first day of trading on the secondary market. Taken together, our results provide evidence that basic impressions of management have a significant impact on investors’ assessments of firm quality.