How Does Analyst Coverage Affect the Quantity, Timing, and Content of Media Coverage?

52 Pages Posted: 8 Mar 2019 Last revised: 18 Dec 2020

See all articles by Nicholas M. Guest

Nicholas M. Guest

Cornell University - Samuel Curtis Johnson Graduate School of Management

Jaewoo Kim

University of Oregon - Department of Accounting

Date Written: December 17, 2020

Abstract

This paper examines how sell-side analyst coverage influences the quantity, timing, and content of firm-specific media coverage. On the one hand, the loss of analyst information, on which journalists rely, raises the costs of developing a news article. On the other hand, the loss reduces competition and increases investor uncertainty, thus raising the benefits of news articles. Consistent with the added costs outweighing the added benefits, our initial evidence suggests that exogenous reductions in analyst coverage decrease the overall quantity of media coverage. However, media coverage around earnings announcements actually increases, albeit not enough to offset the decrease in coverage at other times. Furthermore, earnings announcement media coverage becomes substantially more informative, as measured by the ability of media sentiment to predict future performance. Overall, our results suggest drops in analyst coverage decrease overall media coverage and shift the media’s information production towards lower cost, more predictable activities.

Keywords: financial media, sell-side analysts, intermediary, news, earnings, sentiment

JEL Classification: G14, G24, G29, G30, M41

Suggested Citation

Guest, Nicholas M. and Kim, Jaewoo, How Does Analyst Coverage Affect the Quantity, Timing, and Content of Media Coverage? (December 17, 2020). Available at SSRN: https://ssrn.com/abstract=3337116 or http://dx.doi.org/10.2139/ssrn.3337116

Nicholas M. Guest (Contact Author)

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

342 Sage Hall
Ithaca, NY 14853
United States

Jaewoo Kim

University of Oregon - Department of Accounting ( email )

Lundquist College of Business
1208 University of Oregon
Eugene, OR 97403
United States

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