Terrorist Attacks and Pricing of Initial Public Offerings

Prior research in psychology shows that emotions affect decision-making and information processing. Motivated by this finding we investigate the relation between terrorist attacks and the pricing of initial public offerings. Using a sample of 372 IPOs affected by terrorist attacks in the U.S. we show that IPOs affected by terrorist attacks have lower first-day return than IPOs not affected by terrorist attacks. We conduct a battery of robustness checks and our main findings hold. Taken together, our findings show that investor sentiment is influenced by extreme negative events.

Dr Abhinav Goyal

Abhinav Goyal is Senior Lecturer of Corporate Finance at the Management School, University of Liverpool, UK. Abhinav has received “Best Paper Award” by Eastern Finance Association for his paper published in Financial Review, 2015, and at the Asian Finance Association in 2018. Currently he is visiting Monash University on his sabbatical. He has presented his research in more than 30 academic seminars and conferences worldwide, including Reserve Bank of India and De Nederlandsche Bank, and published in top-tier international accounting and finance journals like Journal of Financial and Quantitative Analysis (JFQA), Journal of Econometrics (JoE), Accounting Horizons (AH), and Financial Review (FR), among others. In 2015, Abhinav held a Visiting Professor Position at Xi’an Jiaotong-Liverpool University, China. He completed his Ph.D. from Smurfit Graduate Business School, Ireland and Masters from Simon Fraser University, Canada.

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