Media legitimation effects in the market for initial public offerings

In this study, we argue that media-provided information affects investors' impressions of newly public firms. In 225 initial public offerings (IPOs), the volume of media-provided information had a negative, diminishing relationship with underpricing and a positive, diminishing relationship with stock turnover on the first day of trading. The relationship between the tenor of media-provided information and underpricing increases at a nonlinear rate, and decreases similarly for turnover. Findings provide important evidence that publicly available information not only reflects IPOs' legitimacy, but also adds to their legitimacy and influences investor behavior.