The Role of Corporate Governance News: Evidence from Italy

Abstract

Stock market prices reflect information on firms' business environments, operations and, in general, firms' fundamentals. Recently, various studies analyze the link between news coverage and stock prices showing that mass media has a significant impact on financial markets. This paper analyze the interactions between the mass media and the stock market focusing on corporate governance news release. By using a large sample of corporate governance news released between 2003 and 2007, we examine the link between abnormal stock returns and corporate governance news. We find evidence that stock returns are influenced by the semantic content of corporate governance news, by firm performance and health and by the interaction of these variables.

Keywords: corporate governance, shareholder value, event study, text analysis

JEL Classification: G14, G34