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Selective Publicity and Stock Prices
Author(s) -
SOLOMON DAVID H.
Publication year - 2012
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.2012.01726.x
Subject(s) - earnings , disappointment , publicity , stock (firearms) , media coverage , business , negative information , monetary economics , affect (linguistics) , stock price , economics , financial economics , advertising , finance , marketing , psychology , mechanical engineering , social psychology , paleontology , communication , sociology , series (stratigraphy) , cognitive psychology , engineering , media studies , biology
I examine how media coverage of good and bad corporate news affects stock prices, by studying the effect of investor relations (IR) firms. I find that IR firms “spin” their clients' news, generating more media coverage of positive press releases than negative press releases. This spin increases announcement returns. Around earnings announcements, however, IR firms cannot spin the news and their clients' returns are significantly lower. This pattern is consistent with positive media coverage increasing investor expectations, creating disappointment around hard information. Using reporter connections and geographical links, I argue that IR firms causally affect both media coverage and returns.