The Role of the Business Press in Creating and Disseminating Information around Earnings Announcements

• In Event: Research with an Impact on Scholarship and Practice

Abstract

This paper investigates the role of business press in creating and disseminating information around earnings announcements by examining different motivations of trading volume. We find that press coverage is associated with trading activity motivated by differential belief revision, but not differential interpretation, consistent with the information dissemination role of the press around earnings announcements. When we divide press coverage into full articles with additional editorial content and news flashes merely repeating verbatim of firm-disclosed press releases, we find that coverage of full articles explains trading volume motivated by differential interpretation, while coverage of news flashes explains trading volume motivated by differential belief revision. We also report that the information creation role of full articles is pronounced when information users’ sophistication is high. Overall, we provides new evidence to the literature by showing that each type of business press plays a distinct informational role in explaining trading activity.

Authors

• Joshua Coyne, University of Memphis

• Kevin Kim, The University of Memphis

• Sangwan Kim, University of Massachusetts-Boston