Post-IPO Performance When Analysts Report A First-mover Advantage

We identify IPO firms with a first-mover advantage (FMA) through a textual analysis of initial coverage reports. Based on a sample of 10,233 initial coverage reports for 2,887 US firms that went public during 1997-2017, we find FMA IPOs tend to be younger, smaller, and more often venture-capital backed than other IPO firms. IPO firms identified by analysts as having FMA significantly outperform other IPOs across widely used operating performance measures for up to five years post IPO. The results do not seem to be driven by differences in pre-IPO characteristics, survivorship bias, or the non-random assignment of the first-mover advantage. Our findings remain robust to variations to the method used to identify first-mover IPOs.