The Information Role of the Media in Earnings News

66 Pages Posted: 11 Nov 2017 Last revised: 28 Jan 2021

See all articles by Nicholas M. Guest

Nicholas M. Guest

Cornell University - Samuel Curtis Johnson Graduate School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: January 13, 2021

Abstract

I reexamine whether media articles with substantive editorial content inform the market's reaction to firms' earnings news. Using variation in earnings announcement coverage due to restructuring at The Wall Street Journal (WSJ), my analyses suggest that WSJ earnings articles improve price discovery and increase trading volume at S&P 500 earnings announcements. Additionally, textual analysis suggests media articles that differ more from the firm's earnings release increase trading volume, and that the differences speed up (slow down) price discovery when they corroborate (contradict) the tone of the firm's news. Such high difference articles are slightly longer, are more readable and specific, include more references to the industry and economy, repeat less "stale" news published in previous WSJ articles, and quote more investor and expert sources. Overall, my paper contributes to research on the role of the media in earnings news by providing evidence that journalists' editorial content helps investors understand firms' earnings, instead of simply entertaining or increasing awareness.

Keywords: business journalism, media, price discovery, volume, returns, earnings

JEL Classification: M40, M41, G10, G11, G12, G14, G20

Suggested Citation

Guest, Nicholas M., The Information Role of the Media in Earnings News (January 13, 2021). Available at SSRN: https://ssrn.com/abstract=3067387 or http://dx.doi.org/10.2139/ssrn.3067387

Nicholas M. Guest (Contact Author)

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

342 Sage Hall
Ithaca, NY 14853
United States

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