Does the media help or hurt retail investors during the IPO quiet period?

Bushee, Brian J.; Cedergren, Matthew C.; Michels, Jeremy

doi:10.1016/j.jacceco.2019.101261

Cited by 85 publications

(25 citation statements)

References 37 publications

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“…For example, studies find that local media coverage is associated with local trading activities (Engelberg & Parsons, 2011), that media sentiment predicts stock returns and trading behavior (Tetlock, 2007), and that traditional media coverage predicts lower subsequent stock volatility and turnover (Jiao et al, 2020). In the case of IPOs, studies show that more media coverage during the quiet period is associated with more attention-driven retail purchases (Bushee et al, 2020), media sentiment and first-day returns are positively correlated (Bajo & Raimondo, 2017), and long-run returns are lower for IPOs with more pre-IPO newspaper articles (You et al, 2018). However, the unique information structure of Wikipedia distinguishes it from traditional media and most social media platforms.…”

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confidence: 99%

Investor awareness or information asymmetry? Wikipedia and IPO underpricing

Boulton

Shohfi

Xin

2021

The Financial Review

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We use the presence of a Wikipedia article for initial public offering (IPO) firms to test theories of information asymmetry and investor awareness. Although we find limited support for the former, our results provide strong support for theories of investor awareness. Specifically, IPO firms with a Wikipedia article exhibit significantly higher underpricing and offer price revisions than do IPO firms without a Wikipedia article. Investor awareness has positive long-term effects, including greater analyst following and institutional ownership for up to 3 years after the offering. The effect is robust to firm-specific Google search volume, news coverage, retail trading intensity, social media activity, propensity score matching, and an instrumental variable approach.

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confidence: 99%

Investor awareness or information asymmetry? Wikipedia and IPO underpricing

Boulton

Shohfi

Xin

2021

The Financial Review

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“…Finally, we examine how news media responds to climate risks revealed in performance briefings. Existing research indicates that news media plays an important role in stock markets as an information intermediary (Bushee et al 2020 ). Besides, investors’ trading decisions can be affected by the media tone of the firm.…”

Section: Empirical Results and Discussionmentioning

confidence: 99%

Corporate climate risk and stock market reaction to performance briefings in China

Xiao

Liu

et al. 2022

Environ Sci Pollut Res

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This study aims to enrich our understanding of the valuation consequence of climate risk in financial markets. The primary focus of our study is on the stock price reaction to firms’ climate-risk-related information. We employ transcripts of Chinese listed firms’ performance briefings to capture the climate risk at the firm level. Using a sample of Chinese listed firms between 2009 and 2021, we find that greater corporate climate risks lead to negative market reactions over a short time window, consistent with the market quickly comprehending corporate climate risks. This result holds for a series of robustness checks. We further find that the negative impact of corporate climate risk on the stock price reaction operates through the increased market trading activities, greater investor attention, and reduced positive media coverage. Finally, we demonstrate that industry carbon emission, local abnormal temperature, state ownership, institutional shareholding, and dividend payout are important moderators that shape the association of the corporate climate risk and the adverse market reaction. Our evidence suggests that disclosures of climate-related information can help the stock market to price climate risk more efficiently.

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“…The role of the media has been gaining attention by the researchers in the field of finance and corporate finance in particular (Ahmad et al, 2016;Bajo and Raimondo, 2017;Liu et al, 2014;Seng et al, 2017;Tetlock, 2014;Comiran et al, 2018), the attention has been primarily paid to the effect of media on retail investors (Bushee et al, 2020). However, one of the recent advances in the field of behavioral economics, the theory of Narrative Economics (Davis, 2020;Shiller, 2017), assumes that the activity of all economic agents is influenced by narratives, but not plain facts.…”

Section: Introductionmentioning

confidence: 99%

Impact of news sentiment and topics on IPO underpricing: US evidence

Fedorova

Druchok

Drogovoz

2021

IJAIM

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Purpose The goal of the study is to examine the effects of news sentiment and topics dominating in the news field prior to the initial public offering (IPO) on the IPO underpricing. Design/methodology/approach The authors’ approach has several steps. The first is textual analysis. To detect the dominating topics in the news, the authors use Latent Dirichlet allocation. The authors use bidirectional encoder representations from transformers (BERT) pretrained on financial news corpus to evaluate the tonality of articles. The second is evaluation of feature importance. To this end, a linear regression with robust estimators and Classification and Regression Tree and Random Forest are used. The third is data. The text data consists of 345,731 news articles from Thomson Reuters related to the USA in the date range from 1 January 2011 to 31 May 2018. The data contains all the possible topics from the website, excluding anything related to sports. The sample of 386 initial public offerings completed in the USA from 1 January 2011 to 31 May 2018 was collected from Bloomberg Database. Findings The authors found that sentiment of the media regarding the companies going public influences IPO underpricing. Some topics, namely, the climate change and environmental policies and the trade war between the US and China, have influence on IPO underpricing if they appear in the media prior to the IPO day. Originality/value The puzzle of IPO underpricing is studied from the point of Narrative Economics theory for the first time. While most of the works cover only some specific news segment, we use Thomson Reuters news aggregator, which uses such sources The New York Post, CNN, Fox, Atlantic, The Washington Post ? Buzzfeed. To evaluate the sentiment of the articles, a state-of-the-art approach BERT is used. The hypothesis that some common narratives or topics in the public discussion may impose influence on such example of biased behaviour like IPO underpricing has also found confirmation.

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Does the media help or hurt retail investors during the IPO quiet period?

Cited by 85 publications

References 37 publications

Investor awareness or information asymmetry? Wikipedia and IPO underpricing

Investor awareness or information asymmetry? Wikipedia and IPO underpricing

Corporate climate risk and stock market reaction to performance briefings in China

Impact of news sentiment and topics on IPO underpricing: US evidence

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