The Role of Newswires in Screening and Disseminating Value-Relevant Information in Periodic SEC Reports

49 Pages Posted: 3 Jul 2010 Last revised: 10 Mar 2011

Edward Xuejun Li

City University of New York (CUNY) - Stan Ross Department of Accountancy

K. Ramesh

Rice University

Min Shen

City University of New York (CUNY) - Stan Ross Department of Accountancy

Date Written: April 20, 2010

Abstract

We examine the role of newswires in identifying and conveying market-moving information in periodic SEC reports to capital market participants. Using data on Dow Jones Newswires, we find that newswires are more likely to send alerts on firms not releasing preliminary earnings, having credit ratings, included in major market indices, with litigation exposure, or reporting losses. Reflective of the market’s focus on certain key events, firms with a nonstandard audit opinion, in the process of delisting, reporting unusual accounting items, or raising equity capital also receive alerts. Moreover, not only do we find significant price and volume reactions to the alerts at the daily level, but also we document immediate intra-day market activity triggered by the alerts, whereas no similar reaction is found for SEC filings that trigger the alerts. Additional analysis suggests that the intra-day reaction is not driven by noise trading.

Keywords: Information Intermediaries, Newswires, Periodic SEC Reports, Information Dissemination, Market Microstructure

JEL Classification: G14, M40

Suggested Citation

Li, Edward Xuejun and Ramesh, K. and Shen, Min, The Role of Newswires in Screening and Disseminating Value-Relevant Information in Periodic SEC Reports (April 20, 2010). Accounting Review, Vol. 86, No. 2, pp.. 669-701, March 2011. Available at SSRN: https://ssrn.com/abstract=1633588

Edward Xuejun Li

City University of New York (CUNY) - Stan Ross Department of Accountancy ( email )

One Bernard Baruch Way, Box B12-225
New York, NY 10010
United States
646-312-3235 (Phone)

K. Ramesh (Contact Author)

Rice University ( email )

236 McNair Hall
Jones Graduate School of Business
Houston, TX 77005
United States
713.348.5380 (Phone)
713.348.6296 (Fax)

Min Shen

City University of New York (CUNY) - Stan Ross Department of Accountancy ( email )

One Bernard Baruch Way, Box B12-225
New York, NY 10010
United States
646-312-3230 (Phone)

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