The Incremental Value Relevance of Media Coverage of Earnings Announcements: Evidence from the Trading of Short Sellers

47 Pages Posted: 4 Oct 2017 Last revised: 16 Jun 2019

See all articles by Lynn L. Rees

Lynn L. Rees

Utah State University - Huntsman School of Business

Brady J. Twedt

University of Oregon - Lundquist College of Business

Date Written: June 14, 2019

Abstract

We investigate the relation between media coverage and the trading behavior of short sellers around earnings announcements, an event which garners significant market attention. Prior research finds conflicting evidence on the role of the media in the price discovery process. We find that short sellers increase their activity in line with the tone of media coverage around earnings announcements, after controlling for earnings news and other variables that affect relative levels of short selling. This evidence is consistent with media coverage disseminating incremental value relevant information to sophisticated capital market traders. Furthermore, we show that information in the media successfully forecasts earnings information in the days leading up to the earnings announcement, and that short sellers trade in a manner consistent with information provided in media coverage preceding the earnings announcement. Our findings are consistent with the media facilitating the price discovery process around the release of earnings.

Suggested Citation

Rees, Lynn L. and Twedt, Brady J., The Incremental Value Relevance of Media Coverage of Earnings Announcements: Evidence from the Trading of Short Sellers (June 14, 2019). Available at SSRN: https://ssrn.com/abstract=3047383 or http://dx.doi.org/10.2139/ssrn.3047383

Lynn L. Rees (Contact Author)

Utah State University - Huntsman School of Business ( email )

3500 Old Main Hill
Logan, UT 84322-3500
United States
435-797-2272 (Phone)

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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