The Role of the Media in the Launch of Internet IPOs
Hong Kong University of Science & Technology - HKUST School of Business and Management
University of Melbourne - Department of Finance; Financial Research Network (FIRN)
Indiana University - Kelley School of Business - Department of Finance; China Academy of Financial Research (CAFR)
University of Colorado at Denver
May 24, 2006
We document that there was media hype about internet stocks during the bubble. However, the media hype about internet stocks during the bubble was discounted: though the media coverage positively affected pre-IPO value revisions, it affected internet IPOs more than non-internet IPOs only after the bubble burst. Further, though the pre-IPO media coverage positively affected first-day returns only after the bubble burst, the effect on the internet IPOs was the same as the effect on the non-internet IPOs. This suggests that the media affect prices more in primary markets than in secondary markets. In both cases, the impact of the media is higher during bust times than during boom times.
Number of Pages in PDF File: 28
Keywords: Initial public offering, media, underpricing, internet bubble
JEL Classification: E32, G14, G30
Date posted: April 18, 2006
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