Managers, investors, the financial press, and other capital market participants often use categories to describe firms or their securities. Common examples include “bellwether,” “blue chip,” “tech,” “penny,” and “start-up.” Although these categories may increase a firm’s visibility, they can lead market participants to overlook individual firm characteristics and thus bias their evaluation of a firm.
In a recent study, we examine how firm categorization influences investor behavior. In particular, we examine how a firm’s status as a unicorn influences investor demand and retail investment activity at its initial public offering (IPO). We focus our analysis on unicorn IPOs primarily because … Read more