Harnessing media attention: Strategic press releases around earnings announcements

Abstract

We document that firms are 80% more likely to issue non-earnings press releases during the earnings announcement period when delivering extremely negative earnings news. These non-earnings press releases are insufficient to improve negative announcement returns in isolation. However, if the media covers the non-earnings press release, announcement returns increase by about 6% and are sustained afterward. These findings are concentrated in smaller firms. Our interpretation is that, as an alternative to manipulating earnings, firms focusing on short-term return performance strategically time press releases to maximise the likelihood of beneficial media coverage and thus minimise the impact of negative earnings news.

Keywords: strategic press releases, media coverage, earnings announcements

JEL Classification: G14, G34, M41