Friends at WSJ: Journalist Connections, News Tone, and Stock Returns

56 Pages Posted: 4 Jun 2018 Last revised: 3 Dec 2018

See all articles by Guosong Xu

Guosong Xu

WHU - Otto Beisheim School of Management

Date Written: December 1, 2018

Abstract

This paper studies the effect of the firm–journalist network on news tone and stock returns. Using a unique dataset on the firm's and the CEO's connections to Wall Street Journal (WSJ) reporters, I find that such connections lead to markedly more favorable coverage of corporate M&A news and to better market reactions to the mergers. The effect on the financial market is larger for the deals featured on the front page of the WSJ. For identification, I instrument the connected coverage with the reporters' turnover and find similar results. Furthermore, using Rupert Murdoch's acquisition of the WSJ as an exogenous shock to journalistic independence, I show that firms previously connected to Mr. Murdoch receive better coverage and more positive stock returns after the ownership change.

Keywords: News Sentiment, Stock Returns, Mergers and Acquisitions, Financial Journalism

JEL Classification: D03, G02, G34

Suggested Citation

Xu, Guosong, Friends at WSJ: Journalist Connections, News Tone, and Stock Returns (December 1, 2018). Available at SSRN: https://ssrn.com/abstract=3189273 or http://dx.doi.org/10.2139/ssrn.3189273

Guosong Xu (Contact Author)

WHU - Otto Beisheim School of Management ( email )

Vallendar
Germany

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