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

Research output: Other Conference ContributionsConference Paper (other)Other Conference Paperpeer-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 languageEnglish
DOIs
Publication statusPublished - Oct 2018
Event2018 Financial Management Association Annual Meeting - San Diego, United States
Duration: 10 Oct 201813 Oct 2018
https://www.fma.org/san-diego#program

Conference

Conference2018 Financial Management Association Annual Meeting
Abbreviated title2018 FMA
CountryUnited States
CitySan Diego
Period10/10/1813/10/18
Internet address

Fingerprint

Investor sentiment
Retail
Abnormal returns
Stock performance

Keywords

  • IPO
  • Media Tone
  • Investor Sentiment
  • China

Cite this

YOU, J., COAKLEY, J., FIRTH, M. A., FUERTES, A-M., & SHEN, Z. (2018). Driving the Presence of Investor Sentiment: The Role of Media Tone in IPOs. Paper presented at 2018 Financial Management Association Annual Meeting, San Diego, United States. https://doi.org/10.2139/ssrn.3221073
YOU, Jiaxing ; COAKLEY, Jerry ; FIRTH, Michael Arthur ; FUERTES, Ana-Maria ; SHEN, Zhe. / Driving the Presence of Investor Sentiment: The Role of Media Tone in IPOs. Paper presented at 2018 Financial Management Association Annual Meeting, San Diego, United States.
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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.",
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YOU, J, COAKLEY, J, FIRTH, MA, FUERTES, A-M & SHEN, Z 2018, 'Driving the Presence of Investor Sentiment: The Role of Media Tone in IPOs' Paper presented at 2018 Financial Management Association Annual Meeting, San Diego, United States, 10/10/18 - 13/10/18, . https://doi.org/10.2139/ssrn.3221073

Driving the Presence of Investor Sentiment: The Role of Media Tone in IPOs. / YOU, Jiaxing; COAKLEY, Jerry; FIRTH, Michael Arthur ; FUERTES, Ana-Maria; SHEN, Zhe.

2018. Paper presented at 2018 Financial Management Association Annual Meeting, San Diego, United States.

Research output: Other Conference ContributionsConference Paper (other)Other Conference Paperpeer-review

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

AU - YOU, Jiaxing

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AU - SHEN, Zhe

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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.

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YOU J, COAKLEY J, FIRTH MA, FUERTES A-M, SHEN Z. Driving the Presence of Investor Sentiment: The Role of Media Tone in IPOs. 2018. Paper presented at 2018 Financial Management Association Annual Meeting, San Diego, United States. https://doi.org/10.2139/ssrn.3221073