The long-run role of the media: Evidence from initial public offerings

Laura Xiaolei Liu, Ann E. Sherman, Yong Zhang

Research output: Journal article publicationJournal articleAcademic researchpeer-review

95 Citations (Scopus)


The unique characteristics of the U.S. initial public offering (IPO) process, particularly the strict quiet period regulations, allow us to explore the effects of media coverage when the coverage does not contain genuine news (i.e., hard information that was previously unknown). We show that a simple, objective measure of pre-IPO media coverage is positively related to the stock's long-term value, liquidity, analyst coverage, and institutional investor ownership. Our results are robust to additional controls for size, to using abnormal or excess media, and to an instrumental variable approach. We also find that pre-IPO media coverage is negatively related to future expected returns, measured by the implied cost of capital. In all, we find a long-term role for media coverage, consistent with Merton's attention or investor recognition hypothesis.
Original languageEnglish
Pages (from-to)1945-1964
Number of pages20
JournalManagement Science
Issue number8
Publication statusPublished - 1 Jan 2014


  • Corporate finance
  • Finance
  • Financial institutions
  • Initial public offerings
  • Markets
  • Media coverage
  • Securities

ASJC Scopus subject areas

  • Strategy and Management
  • Management Science and Operations Research


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