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Purpose – The purpose of this paper is to propose a model of financial communication to investigate the process of communicating risk signals between listed companies and their individual retail investors in initial public offerings (IPOs). Design/methodology/approach – A survey study on individual IPO investors (n=212) in the Hong Kong Stock Exchange was conducted to examine how risk estimates of individual retail investors were affected by three factors of financial communication, namely organizational trust, organizational reputation and investors’ trust in the media specialists. Structural equation modeling analysis was conducted. Findings – Respondents’ perceived risks of below-target returns and perceived risks of losses of principals were significantly affected by their perceived market risks. Respondents relied significantly on organizational trust to estimate their amounts of target returns and mitigate their perceived risks of losses of principals. Organizational reputation, which could be possibly reinforced by respondents’ trust in the media specialists, could enhance organizational trust. Practical implications – Corporate communications practitioners should pay attention to the effect of perceived market risk on risk estimate. As organizational trust is a significant precondition of risk taking in IPOs, practitioners should rethink the effectiveness of financial communication in which organizational trust, organizational reputation and investors’ trust in the media specialists are interrelated. Originality/value – There is a lack of research in financial communication from the organization-stakeholders perspective. This paper conceptualizes financial communication and provides insights to both scholars and practitioners in corporate communications on how significant factors of financial communication affect risk estimate in the financial market.

This study investigated media reputation in initial public offerings (IPOs) by proposing eight attributes of substantive media reputation from environmental and product-resource perspectives. A content analysis on financial news coverage (2281 newspaper articles from 2004 to 2010) in Hong Kong was conducted to examine how print media reported financial and nonfinancial information on 38 IPO firms in the sectors of financial, properties and construction, and consumer goods. Results from partial least squares analysis showed that, although substantive media reputation and recency of news coverage together only explained a small proportion of changes in IPO share price, substantive media reputation has a significant positive effect on changes in IPO share price. Apart from the significant positive effect from the presentation tone of environmental attributes, the tone of social attributes had a significant negative effect on substantive media reputation. With the increasing concern on measuring media reputation attributes in financial news coverage across different contexts, this study contributes to the applicability of environmental and product-resource attributes in the specific context of IPOs.

With the significance of risk-related information in the financial market, the purpose of this study is to explore the conception of corporate risk transparency from the perspective of individual retail investors. The conception of corporate risk transparency was discussed based on the interrelationships among the effects of risk disclosure, namely corporate reputation, corporate trust and media visibility, in the financial market. A survey study on individual initial public offering (IPO) investors (N=212) in the Hong Kong Stock Exchange was conducted. Structural equation modeling analyses showed that perceived importance of corporate reputation and perceived importance of corporate trust were indeed interrelated in forms of corporate attributes in risk disclosure. Diversity of media used by individual IPO investors, which was a factor of media visibility, would positively affect perceived importance of both corporate reputation and corporate trust.