The Impact of Media Exposure and Market Psychology on the Underpricing of Initial Public Offerings : The UK Case

The paper examines the relationship between the UK companies' first day returns from Initial Public Offerings (IPO) that took place on London Stock Exchange during the period January 1997 - May 2002 and the media exposure they received prior to their listing. Our results indicate that there is a systematic relationship between the variables capturing the market sentiment surrounding an IPO and its first day returns. The underpricing of an IPO candidate follows its recent IPOs' level of underpricing only before the tech-crash. Also, on average, big companies offer lower first day returns and small companies raise relatively more money when going public