Media sentiment and IPO underpricing

Bajo, Emanuele; Raimondo, Carlo

doi:10.1016/j.jcorpfin.2017.06.003

Cited by 147 publications

(93 citation statements)

References 41 publications

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“…Consider two different firms, one that receives relatively more favorable media coverage (i.e., media sentiment closer to 1) and another that receives relatively more negative media coverage (i.e., media sentiment closer to −1). Recent research shows that firms with relatively more positive media sentiment are more likely to be considered for funding (Aggarwal & Singh, ; Bajo & Raimondo, ). While the actual matching of VCs and ventures may be endogenous, a technology venture's media sentiment (i.e., the combination of positive and negative media reporting about the venture) is exogenous.…”

Section: Analysis and Resultsmentioning

confidence: 99%

Does VC backing affect brand strategy in technology ventures?

Forti

Munari

Zhang

2019

Strategic Entrepreneurship

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Research Summary: The resource-based view of the firm characterizes brands as important resources for firm growth and competitive advantage. Existing studies offer theory and evidence that venture capital (VC) backing enhances the growth of new technology ventures along different dimensions. It is not clear, however, whether and how VC backing affects the development of brand assets. In a study of VC-backed and non-VCbacked nanotechnology ventures in the United Kingdom, we find a positive association between VC backing and the development of brand assets. We also find that VC-backed technology ventures tend to create brand assets with a wider scope, which can be deployed across multiple different product-markets.Managerial Summary: Brand strategy is critical for the success of entrepreneurial firms and can be challenging for firms operating in nascent industries that aim to commercialize innovations stemming from general purpose technologies. Such firms face dilemmas on whether to diversify or not into different product-markets, how many brand assets to develop, and whether to leverage a brand asset across multiple product categories. In a study of nanotechnology ventures, we find that VC-backing can affect the development of brand strategy: VCbacked ventures tend to develop more brand assets compared with non-VC-backed ventures and tend to create brand assets with a wider scope, which can be deployed across multiple different product-markets. K E Y W O R D S brands, new venture strategies, resource-based view, technology ventures, venture capital

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Section: Analysis and Resultsmentioning

confidence: 99%

Does VC backing affect brand strategy in technology ventures?

Forti

Munari

Zhang

2019

Strategic Entrepreneurship

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“…9 A high dispersion in the distribution of terms is observed in natural language processing. 10 See, for example, Ritter (1984), Beatty and Welch (1996), Ljungqvist, Jenkinson, and Wilhelm (2003), Park, Borah, and Kotha (2017), Guldiken et al (2017), Bajo and Raimondo (2017), Benson et al (2015), Bertoni, Meoli, and Vismara (2014), Akyol et al (2014), Loughran and McDonald (2013), Ferris et al (2013), Ekkayokkaya and Pengniti (2012), and Liu and Ritter (2011). 11 Higher first-day returns imply more underpricing for the initial offer.…”

Section: Discussionmentioning

confidence: 99%

“…Some of these studies present evidence about the role of news sentiment in predicting stock and market returns (Chen & De, 2014;Dougal & Engelberg, 2012;Garcia, 2013). Mayew and Venkatachalam (2012) used the dictionaries to look at conference calls and future performance, whereas Solomon (2012) and Bajo and Raimondo (2017) considered media coverage and stock prices. Liu and McConnell (2013) studied media attention to proposed acquisitions and the probability of abandoning a deal.…”

Section: Theoretical Framework and Hypothesis Developmentmentioning

confidence: 99%

Governance, sentiment analysis, and initial public offering underpricing

González

Guzmán²,

Tellez‐Falla

et al. 2019

Corporate Governance

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Research Question/Issue: What is the relationship between governance, tone in language, and underpricing of initial public offerings (IPOs) in Latin America?Research Findings/Insights: We find a positive (negative) and statistically significant relationship between board size (board independence) and IPO underpricing at the time firms go public. But more importantly, when interacting with corporate governance variables at the firm level, uncertainty in tone still shows statistical significance, which suggests that tone in communications matters for underpricing independently of governance provisions at the firm level.Theoretical/Academic Implications: Bigger boards seem to lead to greater underpricing, whereas more independent boards mitigate it. This finding stresses the relevance of functional convergence in regions with weak institutions such as Latin America. Our results also suggest that tone matters for underpricing even in firms with good governance practices. We argue that tone in corporate communications is a strong signaling mechanism for market participants.Practitioner/Policy Implications: Our results suggest that tone in firms' communications is relevant for market valuation. In the context of family firms in an underresearched context such as Latin America, we show that reputation effect is priced by the market valuation of the IPO.

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“…They document that price reactions are more pronounced when the press covers (and emphasizes) the announcements, and this effect is stronger for firms with greater information asymmetry problems (i.e., smaller firms with lower analyst coverage) and for more reputable newspapers . Later studies have added further evidence of the media's effect on financial markets: pessimism in the media pushes stock prices downward, followed by a reversion to fundamentals (Tetlock, ); local media coverage strongly predicts local trading (Engelberg & Parsons, ); the media reduce insiders’ future trading profits by disseminating news on prior insider trades reported by regulatory releases (Dai, Parwada, & Zhang, ); the media influence retail investors’ behavior during initial public offerings (Bajo & Raimondo, ); and the media increase stock return momentum (Hillert, Jacobs, & Müller, ) or influence both a fund's propensity to buy stocks of the most covered firms (Fang et al, ) and mutual fund inflows (Solomon, Soltes, & Sosyura, ). One could argue that the association between media coverage and its impact on the financial market suffers from an endogeneity problem, since it is difficult to accept that what is reported in newspapers is exogenous.…”

Section: Literature Reviewmentioning

confidence: 99%