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

Forthcoming, Accounting Horizons

49 Pages Posted: 4 Oct 2017 Last revised: 21 Jan 2021

See all articles by Lynn L. Rees

Lynn L. Rees

Utah State University - School of Accountancy; Utah State University - Huntsman School of Business

Brady J. Twedt

University of Oregon - Lundquist College of Business

Date Written: December 29, 2020

Abstract

We investigate the relation between media coverage and the trading behavior of short sellers around earnings announcements. Prior research provides conflicting evidence on the role of the media, with some studies finding that the media can impede the price discovery process. Our evidence indicates that short sellers increase their activity in line with the tone of media coverage around earnings announcements, after controlling for earnings news and other factors that affect relative levels of short selling. 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 reflected in media coverage preceding the earnings announcement. Our findings are consistent with information contained in the media having value relevance, and suggest that the media may help to facilitate 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 (December 29, 2020). Forthcoming, Accounting Horizons, 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 - School of Accountancy ( email )

College of Business
Logan, UT 84322-3540
United States

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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