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The tone and readability of the media during the financial crisis: Evidence from pre-IPO media coverage

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  • Bhardwaj, Arti
  • Imam, Shahed

Abstract

Prior research suggests that in an IPO market, where investors have little knowledge of IPO companies, the media plays a vital role in facilitating or inhibiting the process of impression formation. This paper examines the tone and readability of the media for IPO companies during the global financial crisis to understand the role of the media when the economic environment is uncertain. Our findings suggest that the tone but not the readability of the media varies under different market conditions. In particular, we find that the tone in the media is more favourable in good times, less so in bad. We suggest that the media is aware of the fact that positive (negative) news articles are more (less) likely to increase retail demand for a stock and, thus, try to hedge their bets during the crisis period and do not want to create unnecessary attention in an uncertain environment.

Suggested Citation

  • Bhardwaj, Arti & Imam, Shahed, 2019. "The tone and readability of the media during the financial crisis: Evidence from pre-IPO media coverage," International Review of Financial Analysis, Elsevier, vol. 63(C), pages 40-48.
    • Handle: RePEc:eee:finana:v:63:y:2019:i:c:p:40-48
    DOI: 10.1016/j.irfa.2019.02.001
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    2. Aktas, Osman Ulas & Kryzanowski, Lawrence & Zhang, Jie, 2021. "Volatility spillover around price limits in an emerging market," Finance Research Letters, Elsevier, vol. 39(C).
    3. Bassyouny, Hesham & Abdelfattah, Tarek & Tao, Lei, 2022. "Narrative disclosure tone: A review and areas for future research," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 49(C).
    4. Xiaohong Shen & Gaoshan Wang & Yue Wang & Alfred Peris, 2021. "The Influence of Research Reports on Stock Returns: The Mediating Effect of Machine-Learning-Based Investor Sentiment," Discrete Dynamics in Nature and Society, Hindawi, vol. 2021, pages 1-14, December.
    5. Hesham Bassyouny & Tarek Abdelfattah, 2022. "Executives vs. governance: Who has the predictive power? Evidence from narrative tone," Review of Quantitative Finance and Accounting, Springer, vol. 58(1), pages 361-382, January.
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