Type: article
Abstract: Valuing a firm's IT resources is particularly challenging in IPO contexts where no prior pricing references exist. Drawing on information asymmetry theory, this study examines how investors use benchmarking to evaluate IT disclosures of IPO firms. We investigate how IPO pricing varies with the prototypical similarity between an IPO firm’s IT disclosure in prospectus and its peer public firms’ annual reports, and how the IT experience of IPO underwriters may moderate such effects. After a multi-stage classification procedure that combines an IT keyword dictionary, a BERT-based classifier, and large language model validation to identify IT-relevant text segments, we compute the similarity between IT disclosure in each IPO prospectus and its industry’s prototypical IT disclosure using Doc2Vec embeddings. Analyzing 2,092 non-IT IPOs between 2010 and 2024, we find that higher prototypical IT similarity is associated with lower IPO underpricing and this effect is attenuated when IPO underwriters possess greater IT-sector experiences.
Authors: Yang, Kai, Du, Kui
Institution: University of Massachusetts Boston
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W7222907856