Media sentiment and IPO underpricing
Emanuele Bajo () and
Journal of Corporate Finance, 2017, vol. 46, issue C, 139-153
During an IPO the issuing firm experiences a dramatic visibility shock caused by a large amount of information released to the public. In this context the media play a pivotal role in conveying information to investors who mostly rely on second-hand and simplified news. We argue that the way in which news is presented may shape retail investors' beliefs and in turn drive the demand for share and first-day returns. Based on over 2800 US IPOs and over 27,000 newspaper articles we show that (a) positive tones are positively associated with IPO underpricing; (b) this effect is stronger when news is reported close to the IPO date or (c) by more reputable newspapers.
Keywords: Initial public offerings; Underpricing; Media (search for similar items in EconPapers)
JEL-codes: G12 G14 L82 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:46:y:2017:i:c:p:139-153
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