Transformations  in
Business & Economics

THE IMPACT OF RUMOURS RELATED TO POLITICAL AND MACROECONOMIC UNCERTAINTY ON IPO SUCCESS: EVIDENCE FROM A QUALITATIVE MODEL
Tomas Meluzin, Adam P. Balcerzak, Michal B. Pietrzak, Marek Zinecker, Karel Doubravsky

ABSTRACT. This article is dedicated to the propagation of rumours in regard to political and macroeconomic uncertainty related to a going public strategy. Rumours might have an enormous impact on the decision making of market participants due to information asymmetry and thus can explain the time-varying character in volumes of initial public offerings. We model the relation between political uncertainty and firms' financing decisions while applying the SIRaRu rumour propagation model investigating the dynamics of the rumour spreading in complex social networks. We document how the IPO activity is adversely affected if confounding announcements in regard to political uncertainty are spread. Some realistic conditions on previous rumour spreading models are supplemented and a new qualitative on trends-based model is derived. Moreover, a transitional graph is developed to study all possible past/future behaviour of the examined variables. Additionally, we propose a graphical solution to reconstruct the development of the variables under study over time .

KEYWORDS:  macroeconomics, politics, rumours, IPO, qualitative models.

JEL classification:  E44, G23, G32.