Are Investors Guided by the News Disclosed by Companies or by Journalists?

31 Pages Posted: 1 Jun 2013 Last revised: 5 Jun 2013

See all articles by Zilu Shang

Zilu Shang

University of Reading - ICMA Centre, Henley Business School

Chris Brooks

University of Bristol - School of Economics, Finance and Management

Rachel McCloy

University of Reading - School of Psychology

Date Written: June 1, 2013

Abstract

Most previous studies demonstrating the influential role of the textual information released by the media on stock market performance have concentrated on earnings-related disclosures. By contrast, this paper focuses on disposal announcements, so that the impacts of listed companies’ announcements and journalists’ stories can be compared concerning the same events. Consistent with previous findings, negative words, rather than those expressing other types of sentiment, statistically significantly affect adjusted returns and detrended trading volumes. However, extending previous studies, the results of this paper indicate that shareholders’ decisions are mainly guided by the negative sentiment in listed companies’ announcements rather than that in journalists’ stories. Furthermore, this effect is restricted to the announcement day. The average market reaction – measured by adjusted returns – is inversely related only when the announcements are ignored by the media, but the dispersion of market reaction – measured by detrended trading volume – is positively affected only when announcements are followed up by journalists.

Keywords: information sentiment, regulatory announcement, mass media stories, media coverage, disposal

JEL Classification: G10, G14

Suggested Citation

Shang, Zilu and Brooks, Chris and McCloy, Rachel, Are Investors Guided by the News Disclosed by Companies or by Journalists? (June 1, 2013). Available at SSRN: https://ssrn.com/abstract=2272609 or http://dx.doi.org/10.2139/ssrn.2272609

Zilu Shang

University of Reading - ICMA Centre, Henley Business School ( email )

Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom

Chris Brooks (Contact Author)

University of Bristol - School of Economics, Finance and Management ( email )

School of Accounting and Finance
15-19 Tyndalls Park Road
Bristol, BS8 1PQ
United Kingdom

Rachel McCloy

University of Reading - School of Psychology ( email )

Reading, RG6 6AH
United Kingdom

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