Munich Personal RePEc Archive

Trademarks, Firm Longevity and IPO Underpricing

Drivas, Kyriakos and Gounopoulos, Dimitrios and Konstantios, Dimitrios and Tsiritakis, Emmanuel (2018): Trademarks, Firm Longevity and IPO Underpricing.

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Abstract

We examine the role of trademarks in firm longevity and IPO underpricing. We borrow arguments from asymmetric information theory and juxtapose alternative explanations to uncover which approach best describes the underpricing phenomenon with the aid of trademarks relationship to firm longevity. We further argue that TMs that are associated with physical products are more likely to reduce information asymmetries than TMs associated with services. Therefore, we posit that TM activity by firms in the service industries is more likely to increase underpricing while in the case of the manufacturing firm’s TM activity is less (or not) likely to result to increased underpricing. We collect 2,275 US IPOs from 1997-2016 and we find that on average the presence of trademarks in a firm’s portfolio increases underpricing. We link our results with the extant literature and provide evidence which supports that higher trademark activity is associated with firm longevity and signaling quality through IPO underpricing.

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