We examine the relationship between corporate culture and initial public offering (IPO) price formation. Using a sample of 935 US IPOs and data on corporate culture from Li et al. (2021b), we find that IPOs of strong culture firms are associated with more positive price revisions and higher initial returns, i.e., more underpricing. These findings hold using an alternative measure of corporate culture, matched samples, and a large set of control variables. Consistent with key theories, the effects appear to be driven by underwriters deliberately compensating investors for revealing information about their perceptions of the firm's culture during bookbuilding.

We investigate the value of investor relations (IR) and find firms with strong IR to experience between five and eight percentage points higher stock returns than those with weak IR during the COVID-19 crisis. Firms with better-quality IR are also associated with higher investor loyalty and appear to have attracted significantly more institutional investors over the crisis period. This suggests that a firm’s IR contributes to value generation by enhancing credibility with shareholders and by diversifying its shareholder base. After decomposing IR into public and private transmission channels, we find the private IR function to be the main driver of our results.