Selective Publicity and Stock Prices

58 Pages Posted: 24 Jan 2010 Last revised: 28 Jun 2014

See all articles by David H. Solomon

David H. Solomon

Boston College - Carroll School of Management

Date Written: July 22, 2010

Abstract

I examine how media coverage of a company’s good and bad news affects the stock price response, by looking at the effect of investor relations (IR) firms. I find that IR firms ‘spin’ their clients’ news by generating more media coverage of positive press releases than negative press releases. This spin increases announcement returns. Around earnings announcements however, IR firms cannot spin the news, and IR firm clients’ returns are significantly lower. This is consistent with positive media coverage increasing investor expectations, creating disappointment around hard earnings information. Using reporter connections and geographical links to newspapers, I argue that IR firms are causally affecting both media coverage and returns.

Keywords: Investor Relations, Media, Asset Pricing, Announcement Returns

JEL Classification: G12, G14, M37

Suggested Citation

Solomon, David H., Selective Publicity and Stock Prices (July 22, 2010). Journal of Finance, 67 (2), 599-637, April 2012.; 23rd Australasian Finance and Banking Conference 2010 Paper. Available at SSRN: https://ssrn.com/abstract=1540309

David H. Solomon (Contact Author)

Boston College - Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

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