The Management of Media Public Relation, Investor Sentiment and Security Offerings
SHAO Xinjian, HE Mingyan, JIANG Ping, XUE Yi, LIAO Jingchi
School of International Trade and Economics, University of International Business and Economics; Center of Dataset, Industrial and Commercial Bank of China; Institute of Research, Shen Zhen Stock Exchange
Abstract:
This paper investigates how the management of media public relation by issuers affects its security pricing. We find that issuer can increase the number of news about itself by spending more money on the management of media public relation. Moreover, this news which aims mainly at marketing the issuing security as advertisement is able to attract more attention of investors and mislead them to be more optimistic about the security value. The more attention, the more investors who will participate in the security subscription, and the more demand for the security, which results to a more positive adjustment of issuing price. However, the more attention of investors before pricing the security will leads to much worse long-term performance of the security when its trading price reverses to the true value in the long run. Our findings imply that there is a conflict between the promotion function of news media and its role as one outside corporate governor.
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