Too Much of Good Things: Addressing the Shape of Relationship Between Media Sentiment and IPO Outcome

Abstract

The influence of mass media sentiment on newly listed firms’ IPO performance has received increasing attention in management research. However, prior literature assumes the positive role of media sentiment in investors' evaluation of the IPO firm. It overlooked the potential downside of the excess level of positive media sentiment. Base on social cognition theory, we contribute to this growing body of research by theorizing and testing a curvilinear relationship between media sentiment and firms' IPO performance. Further, from a social cognitive perspective, we argue that this curvilinear relationship is being moderated by external information cues such as IPO market conditions. Drawing a representative sample of newly listed U.S. initial public offerings from the year 2010 to 2018, we found supports for the proposed inverted U shape relationship between media sentiment and IPO performance. However, such a relationship is being moderated by IPO market conditions. Our framework and findings highlight the complexity and dynamics of media influence on IPO performance.