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Media Coverage and IPO Pricing around the World

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  • Chen, Yangyang
  • Goyal, Abhinav
  • Veeraraghavan, Madhu
  • Zolotoy, Leon

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.

Suggested Citation

  • Chen, Yangyang & Goyal, Abhinav & Veeraraghavan, Madhu & Zolotoy, Leon, 2020. "Media Coverage and IPO Pricing around the World," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 55(5), pages 1515-1553, August.
    • Handle: RePEc:cup:jfinqa:v:55:y:2020:i:5:p:1515-1553_4
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    Citations

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    Cited by:

    1. Bin Yang & Tao Yuan, 2022. "Trademark and IPO underpricing," Financial Management, Financial Management Association International, vol. 51(1), pages 271-296, March.
    2. Mazumder, Sharif & Saha, Pritam, 2021. "COVID-19: Fear of pandemic and short-term IPO performance," Finance Research Letters, Elsevier, vol. 43(C).
    3. Yao-Tsung Wu & Chien-Hung Liu & Kuo-Hao Lin & Dun-Yao Ke, 2024. "Does media coverage matter for the performance of technical trading strategies? Evidence from Taiwan," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 23(1), pages 147-166, January.
    4. Duong, Huu Nhan & Goyal, Abhinav & Kallinterakis, Vasileios & Veeraraghavan, Madhu, 2022. "Democracy and the pricing of initial public offerings around the world," Journal of Financial Economics, Elsevier, vol. 145(1), pages 322-341.
    5. Gounopoulos, Dimitrios & Mazouz, Khelifa & Wood, Geoffrey, 2021. "The consequences of political donations for IPO premium and performance," Journal of Corporate Finance, Elsevier, vol. 67(C).
    6. Chen, Yangyang & Goyal, Abhinav & Veeraraghavan, Madhu & Zolotoy, Leon, 2020. "Terrorist attacks, investor sentiment, and the pricing of initial public offerings," Journal of Corporate Finance, Elsevier, vol. 65(C).
    7. Duong, Huu Nhan & Goyal, Abhinav & Kallinterakis, Vasileios & Veeraraghavan, Madhu, 2021. "Market manipulation rules and IPO underpricing," Journal of Corporate Finance, Elsevier, vol. 67(C).
    8. Espenlaub, Susanne & Goyal, Abhinav & Mohamed, Abdulkadir, 2020. "The impact of shareholders and creditors rights on IPO performance: An international study," The British Accounting Review, Elsevier, vol. 52(1).
    9. Gao, Xin & Xu, Weidong & Li, Donghui & Xing, Lu, 2021. "Media coverage and investment efficiency," Journal of Empirical Finance, Elsevier, vol. 63(C), pages 270-293.
    10. Feng, Guo & Tang, Bo & Wen, Jipeng & Yan, Shuo, 2022. "The effect on stock performance of executives' emotions during IPO roadshows," International Review of Financial Analysis, Elsevier, vol. 81(C).
    11. Blomkvist, Magnus & Korkeamäki, Timo & Takalo, Tuomas, 2022. "Learning and staged equity financing," Journal of Corporate Finance, Elsevier, vol. 74(C).
    12. Liu, Haiming & Chiang, Yao-Min, 2022. "Confucianism and IPO underpricing," Pacific-Basin Finance Journal, Elsevier, vol. 71(C).
    13. Wenjun Wang, 2023. "Can experience mitigate precautionary bidding? Evidence from a quasi-experiment at an IPO auction," Journal of Asset Management, Palgrave Macmillan, vol. 24(2), pages 148-163, March.
    14. Boulton, Thomas J., 2022. "Economic policy uncertainty and international IPO underpricing," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 81(C).
    15. Gao, Xin & Xu, Weidong & Li, Donghui, 2022. "Media coverage and corporate risk-taking: International evidence," Journal of Multinational Financial Management, Elsevier, vol. 65(C).
    16. Jang-Chul Kim & Kaun Y. Lee & Ha-Chin Yi, 2024. "Liquidity difference between non-U.S. and U.S. IPOs on the NYSE listings," Review of Quantitative Finance and Accounting, Springer, vol. 62(1), pages 365-387, January.
    17. Yu-Fen Chen & Cheng-Few Lee & Fu-Lai Lin, 2023. "The influences of information demand and supply on stock price synchronicity," Review of Quantitative Finance and Accounting, Springer, vol. 61(3), pages 1151-1176, October.
    18. Liu, Qigui & Tang, Jinghua & Li, Donghui & Xing, Lu, 2023. "The role of bad-news coverage and media environments in crash risk around the world," Journal of Empirical Finance, Elsevier, vol. 72(C), pages 488-509.
    19. Chen, Yangyang & Chui, Andy C.W. & Goyal, Abhinav & Veeraraghavan, Madhu, 2022. "Societal secrecy and IPO underpricing," Journal of Corporate Finance, Elsevier, vol. 76(C).

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