Political Bias in the Media’s Coverage of Firms’ Earnings Announcements

The Accounting Review, Forthcoming

49 Pages Posted: 20 Jan 2021 Last revised: 21 Jan 2021

See all articles by Lynn L. Rees

Lynn L. Rees

Utah State University - School of Accountancy; Utah State University - Huntsman School of Business

Brady J. Twedt

University of Oregon - Lundquist College of Business

Date Written: January 11, 2021

Abstract

This study examines whether firms’ political activism induces bias in the media’s coverage of earnings announcements and how such coverage impacts markets. We infer firm political ideology based on employee political contributions, and identify firm and manager characteristics associated with distinct ideologies. We find that media outlets negatively slant their coverage of earnings announcements when the political leanings of the outlet are incongruent with the political ideology of the firm. Consistent with slanted coverage affecting market outcomes, we provide evidence that the price reaction to good (bad) earnings news is decreasing (increasing) in the percent of incongruent media outlets covering the earnings announcement. In addition, trading volume and returns volatility are decreasing for good earnings news with the percent of incongruent media outlets. Our results suggest that the prevalent bias across some media outlets in their coverage of political news also affects their coverage of corporate financial events.

Keywords: Media Bias, Political Ideology, Earnings Announcements

JEL Classification: G14, L82, M41

Suggested Citation

Rees, Lynn L. and Twedt, Brady J., Political Bias in the Media’s Coverage of Firms’ Earnings Announcements (January 11, 2021). The Accounting Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3764180

Lynn L. Rees (Contact Author)

Utah State University - School of Accountancy ( email )

College of Business
Logan, UT 84322-3540
United States

Utah State University - Huntsman School of Business ( email )

3500 Old Main Hill
Logan, UT 84322-3500
United States
435-797-2272 (Phone)

Brady J. Twedt

University of Oregon - Lundquist College of Business ( email )

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

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