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

60 Pages Posted: 27 Jul 2018

See all articles by Jiaxing You

Jiaxing You

Xiamen University

Jerry Coakley

University of Essex - Essex Business School

Michael Firth

Lingnan University - Department of Finance and Insurance

Ana-Maria Fuertes

Cass Business School, City University of London

Zhe Shen

Xiamen University

Date Written: July 27, 2018

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 post-IPO 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

JEL Classification: G12

Suggested Citation

You, Jiaxing and Coakley, Jerry and Firth, Michael and Fuertes, Ana-Maria and Shen, Zhe, Driving the Presence of Investor Sentiment: The Role of Media Tone in IPOs (July 27, 2018). 31st Australasian Finance and Banking Conference 2018. Available at SSRN: https://ssrn.com/abstract=3221073 or http://dx.doi.org/10.2139/ssrn.3221073

Jiaxing You

Xiamen University ( email )

Xiamen, Fujian 361005
China

Jerry Coakley

University of Essex - Essex Business School ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom
+44 1206 872455 (Phone)
+44 1206 873429 (Fax)

HOME PAGE: http://www.essex.ac.uk/afm/staff/coakley.shtm

Michael Firth

Lingnan University - Department of Finance and Insurance ( email )

Castle Peak Road
Tuen Mun, New Territories
Hong Kong
China
+852 2616 8160 (Phone)
+852 2466 4751 (Fax)

Ana-Maria Fuertes

Cass Business School, City University of London ( email )

Faculty of Finance
106 Bunhill Row
London, EC1Y 8TZ
United Kingdom
+44 207 477 0186 (Phone)
+44 207 477 8881 (Fax)

HOME PAGE: http://www.city.ac.uk/people/academics/ana-maria-fuertes

Zhe Shen (Contact Author)

Xiamen University ( email )

School of Management
422 Siming South Road
Xiamen, Fujian 361005
China

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