The Media and Mispricing: The Role of the Business Press in the Pricing of Accounting Information

50 Pages Posted: 25 May 2013 Last revised: 13 Nov 2014

See all articles by Michael S. Drake

Michael S. Drake

Brigham Young University - Marriott School

Nicholas M. Guest

Cornell University - Samuel Curtis Johnson Graduate School of Management

Brady J. Twedt

University of Oregon - Lundquist College of Business

Date Written: January 28, 2014

Abstract

This study investigates the role of the business press in the pricing of accounting information. Using a comprehensive dataset of more than 111,000 earnings-related business press articles published from 2000–2010, we find that press coverage of the annual earnings announcement mitigates cash flow mispricing, but has a negligible effect on accrual mispricing. We provide evidence that this impact is driven primarily by the press disseminating the information more broadly, rather than by the creation of new content that helps investors understand the implications of accounting information. Our results suggest that the business press plays an important role in facilitating the market’s ability to efficiently impound accounting information into stock prices and provide new insights into the role of the business press as an information intermediary in capital markets.

Keywords: business press, accrual anomaly, cash flow anomaly, mispricing, information dissemination, information creation

Suggested Citation

Drake, Michael S. and Guest, Nicholas M. and Twedt, Brady J., The Media and Mispricing: The Role of the Business Press in the Pricing of Accounting Information (January 28, 2014). The Accounting Review, Vol. 89, No. 5, pp. 1673-1701, 2014, Kelley School of Business Research Paper No. 2014-41, Available at SSRN: https://ssrn.com/abstract=2269103 or http://dx.doi.org/10.2139/ssrn.2269103

Michael S. Drake (Contact Author)

Brigham Young University - Marriott School ( email )

United States

Nicholas M. Guest

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

342 Sage Hall
Ithaca, NY 14853
United States

Brady J. Twedt

University of Oregon - Lundquist College of Business ( email )

Lundquist College of Business
1208 University of Oregon
Eugene, OR 97403
United States

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