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Journal of Business Communication
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Signaling Corporate Strategy in IPO Communication

A Study of Biotechnology IPOs on the NASDAQ

Hongzhi Gao

University of Otago, hgao{at}business.otago.ac.nz

Jenny Darroch

Claremont Graduate University

Damien Mather

University of Otago

Alan MacGregor

University of Otago

A clear corporate strategy communication can be a signal to financial analysts and public investors at the time of an initial public offering (IPO). This study examines IPO prospectuses of 57 biotechnology firms listed on the NASDAQ between 1997 and 2002. Using regression analysis, this article shows that the clarity, intensity, and consistency of the corporate strategy signal are not strong enough to affect the 1st-day initial returns. However, consistent communication of a prospector strategy negatively impacts 30-day initial returns, whereas consistent communication of a defender strategy positively impacts 30-day initial returns.

Key Words: corporate strategy • communication • IPO • market signal

Journal of Business Communication, Vol. 45, No. 1, 3-30 (2008)
DOI: 10.1177/0021943607309349
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