Do Journalists Help Investors Analyze Firms' Earnings News?
65 Pages Posted: 11 Nov 2017 Last revised: 12 Dec 2018
Date Written: December 11, 2018
I examine whether the market’s reaction to firms’ earnings news varies with analysis (i.e., editorial content) produced by financial journalists. A series of restructuring events at The Wall Street Journal (WSJ) suggests that WSJ articles improve price discovery and increase trading volume at S&P 500 earnings announcements. The estimated effects are stronger when an article contains more original analysis and less content reproduced from the firm’s press release. This evidence improves on 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 increasing their understanding of earnings news, albeit for a limited set of large firms. In other words, journalists’ analysis efforts provide value to readers, which helps explain the continued production of costly earnings-related analysis amid increasing competition from low-cost information sources.
Keywords: business journalism, media, price discovery, volume, returns, earnings
JEL Classification: M40, M41, G10, G11, G12, G14, G20
Suggested Citation: Suggested Citation