Soft Information in the Financial Press and Analyst Revisions

The Accounting Review, Forthcoming

51 Pages Posted: 24 Nov 2020

See all articles by Mark T Bradshaw

Mark T Bradshaw

Boston College

Brandon Lock

Baruch College, CUNY

Xue Wang

Ohio State University - Fisher College of Business

Dexin Zhou

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance

Date Written: September 25, 2020

Abstract

Both sell-side analysts and the media are information intermediaries in capital markets. This study investigates the association between sell-side analyst research and information in firm-specific news coverage. More frequent recent news coverage is associated with stronger market reactions to analysts’ research revisions, and primarily explained by soft information in news coverage. The primary result is robust to using both an instrumental variable and a quasi-natural experimental setting to generate exogenous variation in media coverage, alleviating concerns about endogeneity. In addition, using textual analysis, we document that explicit media references in analyst research reports are significantly associated with more frequent analyst revisions and stronger market reactions to revisions. Our study provides empirical evidence of analysts’ assimilation of information from the financial press and their role in the efficiency of capital markets.

Keywords: media, analysts, analyst revisions, tone, soft and hard news

JEL Classification: G12, G14, G24

Suggested Citation

Bradshaw, Mark T and Lock, Brandon and Wang, Xue and Zhou, Dexin, Soft Information in the Financial Press and Analyst Revisions (September 25, 2020). The Accounting Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3701349 or http://dx.doi.org/10.2139/ssrn.3701349

Mark T Bradshaw

Boston College ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

Brandon Lock (Contact Author)

Baruch College, CUNY ( email )

One Bernard Baruch Way, Box B12-225
New York, NY 10010
United States

Xue Wang

Ohio State University - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States
614-688-1330 (Phone)
614-292-2118 (Fax)

Dexin Zhou

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance ( email )

55 Lexington Avenue
New York, NY 10010
United States

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