Business Press Coverage and the Market Pricing of Good and Bad News

Abstract

Using a large database of news stories from newswires, national press, internet-based news outlets, news aggregators and local news channels, we study differences in the coverage of business news across types of press sources. We document that bad news business stories receive more coverage than good news stories in newswires, the national press and local news channels, while the opposite occurs in internet-based news outlets and news aggregators. We observe that the gap between good and bad news coverage is smaller for stories that are based on firm fundamentals and larger for bigger firms. We also report results that we propose help distinguish between the different roles that prior research has hypothesized are played by the business press. In particular, our evidence most supports the hypothesis that press coverage enhances firm visibility, leading to higher demand for the firm’s shares. We conclude that while coverage of stories in the business press does provide value-relevant information to investors, the main role of the business press is to make firms more visible to a broad set of market participants.

Keywords: news dissemination, bad news, journalist, visibility, attention, information