Do Journalists Help Investors Analyze Firms' Earnings News?

57 Pages Posted: 11 Nov 2017 Last revised: 27 Dec 2017

Nicholas M. Guest

Cornell University - Samuel Curtis Johnson Graduate School of Management

Date Written: December 26, 2017

Abstract

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

Guest, Nicholas M., Do Journalists Help Investors Analyze Firms' Earnings News? (December 26, 2017). 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 )

314 Sage Hall
Ithaca, NY 14853
United States

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