for example we have found that the prospectus of Seddon’s Pneumatic Tyre was advertised in Freeman’s Journal, a Dublin daily, in 1892 prior to listing on the Dublin exchange. It was not advertised in the Times Book of Prospectuses therefore we exclude it from our sample. Therefore our sample will have a slight bias towards London companies, although it must be stressed that many companies from across the United Kingdom and around the world did advertise in the Times Book of Prospectuses even if the firm subsequently listed on a provincial exchange. Company promoters had a mixed reputation at the time, often trading off reputational concerns against the desire to make a quick profit. One of the most infamous promoters, E.T. Hooley, claimed that: ‘I was never one to concern myself with what happened afterwards.’ Assistance with organizing an IPO did not usually include underwriting the IPO (see Burhop, Chambers, and Cheffins, 2012), and we do not find any instances of ‘firm commitment’ underwriting. The financial press would discuss prospectuses currently circulating, although there was often the suspicion that this coverage had been ‘compromised’ by the companies coming on to market (see Cheffins p. 201). Asymmetric information concerns between promoters and potential shareholders were paramount, and Kennedy (1984) argues that: ‘Victorian company promoters were … ludicrously better informed about the prospects of the ventures they were selling than were the vast majority of potential buyers.’ Company promoters would seek to overcome the information asymmetry problem by methods such as portraying personal financial success (see Cheffins p. 208), adding politicians or nobles to the board of directors (see Armstrong, 1990 and Braggion and Moore, 2013), or seeking local investors (see Lavington, 1921; Franks, Mayer and Rossi, 2009; Chambers and Dimson, 2009, and Cheffins p. 211).
be occupationally informed for that IPO. GEOGRAPHY is the percentage allocation of shares to investors in the same geographical location (i.e., country/county/city/London area) as the firm’s main office. Lavington (1921) claims that: ‘local knowledge on the part of the investor both of the business reputation of the vendor and the prospects of his undertaking would do a good deal to eliminate dishonest promotion and ensure that securities were sold at fair prices fairly near their investment values.’ Michie (2004) makes a similar claim, and Chambers and Dimson (2009) find some evidence of this. Previous studies (e.g., Michaely and Shaw, 1994; Hanley and Wilhelm, 1995, and Aggarwal et al., 2002) assume that institutional investors are more informed. INSTITUTION is the percentage allocation to institutional investors. Chambers and Dimson (2009) investigate day returns on the London Stock Exchange from 1917 to 1986. We therefore control for the same measures of firm risk as them. LNMCAP is the natural logarithm of outstanding shares (both those retained by the vendors and those issued to the public) multiplied by the offer price. LNAGE is the natural logarithm of the age of the company, calculated from the foundation year of the underlying business when reported (or date of incorporation when foundation year is not reported). TRACK is the number of years of historic profits reported in the prospectus. AUDIT is a dummy variable equal to one if the asset valuation is made by an auditor or professional appraiser and zero otherwise. UW is a dummy variable that takes the value of one if the IPO is underwritten by an arms-length underwriter and zero otherwise. PROPSOLD is the proportion of outstanding shares offered to the public in the IPO. 3.3 Descriptive statistics