Weiju Young, Junming Hsu, Huang Po-Yu
This study examines the impacts of (1) Google abnormal search volume index (ASVI) and (2) geographic locations on firms' initial public offering (IPO) underpricing. The results show that pre-IPO ASVI positively affects IPO first-day returns, implying that IPO underpricing is associated with investor sentiment. Urban and city firms have greater underpricing than rural firms, revealing that the former are more information asymmetric. More importantly, the cross term of high ASVI and urban generates serious IPO underpricing, which makes the respective effects of ASVI and location become insignificant. This finding implies that information asymmetry intensifies investor sentiment to increase IPO underpricing.