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The Long-Run Role of the Media: Evidence from Initial Public OfferingsLaura Xiaolei LiuHong Kong University of Science & Technology Ann E. ShermanDePaul University Yong ZhangHong Kong University of Science & Technology (HKUST) January 8, 2011 Midwest Finance Association 2013 Annual Meeting Paper Abstract: The unique characteristics of the U.S. initial public offer (IPO) process, particularly the strict quiet period regulations, allow us to explore the effects of media coverage when the coverage does not contain genuine news (hard information that was previously unknown). We show that a simple, objective measure of pre-IPO media coverage is positively related to the stock’s long term value, liquidity, analyst coverage, and institutional investor ownership. We do not find a relationship between pre-IPO media coverage and long term underperformance. In all, adding to the short term role of attention documented in Da, Engelberg and Gao (2011), we find a long term role for media coverage, consistent with Merton’s (1987) investor recognition hypothesis.
Number of Pages in PDF File: 47 Keywords: media coverage, IPO, initial public offering, investor attention, Merton, investor recognition JEL Classification: G12, G14, G32, G24 working papers seriesDate posted: January 9, 2011 ; Last revised: January 22, 2013Suggested CitationContact Information
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