Driving the Presence of Investor Sentiment: The Role of Media Tone in IPOs

Jiaxing YOU; Jerry COAKLEY; Michael Arthur  FIRTH; Ana-Maria FUERTES; Zhe SHEN

doi:10.2139/ssrn.3221073

Driving the Presence of Investor Sentiment: The Role of Media Tone in IPOs

Jiaxing YOU, Jerry COAKLEY, Michael Arthur FIRTH, Ana-Maria FUERTES, Zhe SHEN

Department of Finance and Insurance

Research output: Other Conference Contributions › Conference Paper (other) › Other Conference Paper › peer-review

Abstract

We read all newspaper articles to measure the pre-IPO media tone for 1,068 Chinese book-built IPOs issued from 2005–2013. We document significant and robust evidence that media tone is related to high IPO first day returns and low long-run abnormal returns. One positive newspaper article can predict an increase of 2.38 – 9.42 percentage points in first-day returns and a decrease of 3.26 – 10.09 percentage points in postIPO three-year abnormal returns. Further analysis reveals that high pre-IPO media tone is positively associated with first-day retail trading and retail demand in the IPO market, indicating that pre-IPO media tone can enhance the presence of investor sentiment around the IPO event. Taken together, these findings are consistent with our hypothesis that media tone can influence post-IPO prices through the presence of investor sentiment, leading to high first-day returns and low long-run stock performance.

Original language	English
DOIs	https://doi.org/10.2139/ssrn.3221073
Publication status	Published - Oct 2018
Event	2018 Financial Management Association Annual Meeting - San Diego, United States Duration: 10 Oct 2018 → 13 Oct 2018 https://www.fma.org/san-diego#program

Conference

Conference	2018 Financial Management Association Annual Meeting
Abbreviated title	2018 FMA
Country/Territory	United States
City	San Diego
Period	10/10/18 → 13/10/18
Internet address	https://www.fma.org/san-diego#program

Keywords

IPO
Media Tone
Investor Sentiment
China

Access to Document

10.2139/ssrn.3221073

Cite this

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title = "Driving the Presence of Investor Sentiment: The Role of Media Tone in IPOs",

abstract = "We read all newspaper articles to measure the pre-IPO media tone for 1,068 Chinese book-built IPOs issued from 2005–2013. We document significant and robust evidence that media tone is related to high IPO first day returns and low long-run abnormal returns. One positive newspaper article can predict an increase of 2.38 – 9.42 percentage points in first-day returns and a decrease of 3.26 – 10.09 percentage points in postIPO three-year abnormal returns. Further analysis reveals that high pre-IPO media tone is positively associated with first-day retail trading and retail demand in the IPO market, indicating that pre-IPO media tone can enhance the presence of investor sentiment around the IPO event. Taken together, these findings are consistent with our hypothesis that media tone can influence post-IPO prices through the presence of investor sentiment, leading to high first-day returns and low long-run stock performance.",

keywords = "IPO, Media Tone, Investor Sentiment, China",

author = "Jiaxing YOU and Jerry COAKLEY and FIRTH, {Michael Arthur} and Ana-Maria FUERTES and Zhe SHEN",

year = "2018",

month = oct,

doi = "10.2139/ssrn.3221073",

language = "English",

note = "2018 Financial Management Association Annual Meeting, 2018 FMA ; Conference date: 10-10-2018 Through 13-10-2018",

url = "https://www.fma.org/san-diego#program",

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Driving the Presence of Investor Sentiment: The Role of Media Tone in IPOs. / YOU, Jiaxing; COAKLEY, Jerry; FIRTH, Michael Arthur et al.
2018. Paper presented at 2018 Financial Management Association Annual Meeting, San Diego, California, United States.

Research output: Other Conference Contributions › Conference Paper (other) › Other Conference Paper › peer-review

TY - CONF

T1 - Driving the Presence of Investor Sentiment: The Role of Media Tone in IPOs

AU - YOU, Jiaxing

AU - COAKLEY, Jerry

AU - FIRTH, Michael Arthur

AU - FUERTES, Ana-Maria

AU - SHEN, Zhe

PY - 2018/10

Y1 - 2018/10

N2 - We read all newspaper articles to measure the pre-IPO media tone for 1,068 Chinese book-built IPOs issued from 2005–2013. We document significant and robust evidence that media tone is related to high IPO first day returns and low long-run abnormal returns. One positive newspaper article can predict an increase of 2.38 – 9.42 percentage points in first-day returns and a decrease of 3.26 – 10.09 percentage points in postIPO three-year abnormal returns. Further analysis reveals that high pre-IPO media tone is positively associated with first-day retail trading and retail demand in the IPO market, indicating that pre-IPO media tone can enhance the presence of investor sentiment around the IPO event. Taken together, these findings are consistent with our hypothesis that media tone can influence post-IPO prices through the presence of investor sentiment, leading to high first-day returns and low long-run stock performance.

AB - We read all newspaper articles to measure the pre-IPO media tone for 1,068 Chinese book-built IPOs issued from 2005–2013. We document significant and robust evidence that media tone is related to high IPO first day returns and low long-run abnormal returns. One positive newspaper article can predict an increase of 2.38 – 9.42 percentage points in first-day returns and a decrease of 3.26 – 10.09 percentage points in postIPO three-year abnormal returns. Further analysis reveals that high pre-IPO media tone is positively associated with first-day retail trading and retail demand in the IPO market, indicating that pre-IPO media tone can enhance the presence of investor sentiment around the IPO event. Taken together, these findings are consistent with our hypothesis that media tone can influence post-IPO prices through the presence of investor sentiment, leading to high first-day returns and low long-run stock performance.

KW - IPO

KW - Media Tone

KW - Investor Sentiment

KW - China

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DO - 10.2139/ssrn.3221073

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T2 - 2018 Financial Management Association Annual Meeting

Y2 - 10 October 2018 through 13 October 2018

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