Media Coverage and IPO Pricing around the World

2019/07/26 by Yangyang Chen, Abhinav Goyal, Madhu Veeraraghavan +1
Business, Management and Accounting · Economics, Econometrics and Finance · #Corporate Finance and Governance #Financial Markets and Investment Strategies #Auditing, Earnings Management, Governance

paper · doi:10.1017/s0022109019000486

Abstract

We study how media coverage impacts pricing of initial public offerings (IPOs) around the world. Higher media coverage in the pre-IPO period leads to lower IPO initial returns. The effect is mitigated in countries with better financial reporting quality, greater shareholder rights protection, and more stringent media censorship, and for IPOs “certified” by reputable intermediaries, while it is amplified in countries with higher levels of media penetration and media trust. Further, IPOs with higher pre-IPO media coverage have lower ex post price revision volatility. Our findings suggest that higher pre-IPO media coverage reduces information asymmetry among investors, leading to less underpriced IPOs.

Citations

• Spreading the Word: Price Discovery and Newswire Dissemination of Management Earnings Guidance
• The Governance Effect of the Media's News Dissemination Role: Evidence from Insider Trading
• Law and Finance
• In Search of Attention
• Do Investors Trade Too Much?
• Where Have All the IPOs Gone?
• The Corporate Governance Role of the Media: Evidence from Russia

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