Do Journalists Help Investors Analyze Firms' Earnings News?
57 Pages Posted: 11 Nov 2017 Last revised: 27 Dec 2017
Date Written: December 26, 2017
I examine whether the market’s reaction to firms’ earnings news varies with analysis (or editorial content) produced by financial journalists. A series of natural experiments at The Wall Street Journal (WSJ) shows that WSJ articles increase trading volume and improve price discovery at earnings announcements. The effects are stronger when an article contains more original analysis and less content reproduced from the firm’s press release. This evidence refines inferences from prior studies that find media dissemination, but not analysis, makes the market’s earnings response more efficient. Instead, my paper suggests media analysis also enhances investors’ trading decisions by improving their understanding of the implications of firms’ earnings news. In other words, journalists’ analysis efforts provide value to readers, which helps explain the continued production of costly earnings-related analysis amid increasing pressure from low-cost information sources.
Keywords: financial journalism, volume, returns, price discovery, earnings
JEL Classification: M40, M41, G10, G11, G12, G14, G20
Suggested Citation: Suggested Citation