The Impact of Media Exposure and Market Psychology on the Underpricing of Initial Public Offerings: The UK Case

20 Pages Posted: 16 Dec 2003

See all articles by Christos Staikouras

Christos Staikouras

Athens University of Economics and Business - Department of Accounting and Finance

Dimitris Tsatsanis

City University - Cass Business School

Multiple version iconThere are 2 versions of this paper

Date Written: February 12, 2003

Abstract

The paper examines the relationship between the UK companies' first day returns from IPOs (Initial Public Offerings) that took place on London Stock Exchange during the period January 1997 - May 2002 and the media exposure they received prior to their listing. Also, it takes into consideration the underpricing trend of recent offerings, the effect of the technological crash of 2000 and the issue and firm size. Our preliminary results indicate that there is a systematic relationship between the variables capturing the market sentiment surrounding an IPO and its first day returns. Contrary to previous surveys regarding the psychology of the market we found a negative correlation between underpricing and media exposure. Also, the underpricing of an IPO candidate follows its recent IPOs' level of underpricing only before the tech-crash and the mean level of first day returns are significantly higher for the period prior to tech-crash. Finally, our results comply with the past empirical evidence where, on average, big companies offer lower first day returns and small companies raise relatively more money when going public.

Keywords: Initial public ofering, underpricing, market psychology, LSE

JEL Classification: G12, G14

Suggested Citation

Staikouras, Christos and Tsatsanis, Dimitris, The Impact of Media Exposure and Market Psychology on the Underpricing of Initial Public Offerings: The UK Case (February 12, 2003). Cass Business School Research Paper. Available at SSRN: https://ssrn.com/abstract=477445 or http://dx.doi.org/10.2139/ssrn.477445

Christos Staikouras (Contact Author)

Athens University of Economics and Business - Department of Accounting and Finance ( email )

76 Patission Street
Athens, 104 34
Greece
+30 210 8203 459 (Phone)

Dimitris Tsatsanis

City University - Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom
+30 69740 54555 (Phone)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
305
Abstract Views
1,617
rank
60,573
PlumX Metrics