Media Coverage and Management Earnings Guidance

48 Pages Posted: 8 Dec 2016

See all articles by Jihun Bae

Jihun Bae

Erasmus University Rotterdam

Robin Litjens

Tilburg University - CentER and Department of Accountancy

Chul W. Park

The University of Hong Kong - School of Business

Yachang Zeng

Nanyang Technological University

Multiple version iconThere are 2 versions of this paper

Date Written: December 8, 2016

Abstract

The business media disseminates managers’ earnings guidance news more broadly or creates new information content on the guidance (Drake et al. 2014). We hypothesize that the media’s information dissemination encourages managers to continue issuing earnings guidance because their intended messages in earnings guidance can be transmitted more broadly and free of cost to managers. We also hypothesize that the media’s information creation induces managers to stop issuing earnings guidance because the media might interfere with managers’ intended guidance outcomes. Using a comprehensive dataset of media articles covering management guidance from 2007 to 2012, we find evidence supporting these hypotheses. Additionally, we find evidence that the negative impact of the media’s information creation on future guidance issuance is amplified with bad news guidance and attenuated with high analyst following. Our findings provide fresh insight into the information flow in financial markets by documenting not only positive but also negative influences that the media, through its dual roles, exerts on managers’ guidance behavior.

Keywords: business media coverage, management guidance, information dissemination, information creation

JEL Classification: G14, M41

Suggested Citation

Bae, Jihun and Litjens, Robin and Park, Chul Won and Zeng, Yachang, Media Coverage and Management Earnings Guidance (December 8, 2016). Available at SSRN: https://ssrn.com/abstract=2882405 or http://dx.doi.org/10.2139/ssrn.2882405

Jihun Bae

Erasmus University Rotterdam ( email )

Burgemeester Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Robin Litjens

Tilburg University - CentER and Department of Accountancy ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Chul Won Park

The University of Hong Kong - School of Business ( email )

Meng Wah Complex
Pokfulam Road
Hong Kong
China
+852-2859-1081 (Phone)

Yachang Zeng (Contact Author)

Nanyang Technological University ( email )

Singapore, 639798
Singapore

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