• The Charisma Initial Public Offerings and Investors’ Irra- tional Behavior

Abstract

Compared with previous researches which classified IPOs’ characters through market’s response of subscription, this paper provides a new concept - charisma taking value relevant factors into discussion to investigate whether investors’ behavior is rational. This research defines charisma IPOs as those which investors are fond of. A charisma IPOs can draw investors’ participation without comparative advantage in value relevant factors, and then evoke a hot subscription phenomenon. The empirical results suggest that charisma has positive effect on IPOs’ performance in initial period; however, such effect turns to negative in the following terms. The difference fairly addresses the description of investors’ irrational behavior.

Keywords: Subscription, Initial public offerings (IPOs), Charisma, Irrational behavior.