The Monitoring Role of the Financial Press Around Corporate Announcements

This study finds that the financial press serves an important monitoring role by interpreting the tone of corporate announcements, moderating its impact to market participants in the process. Using textual analysis, we report that the press attenuates both the positive and negative tone of firm-initiated disclosures. However, the effect is asymmetric with the media mostly downplaying the tone of highly positive corporate press releases, consistent with the premise that management disclosures containing highly positive tone are less convincing. In addition, we find that the tone of the information produced by the financial media has an effect on market reactions above and beyond the impact of the linguistic content of corporate disclosures. Importantly, the impact of the linguistic content of corporate disclosures to market returns is moderated by the tone of new information included in media articles. Overall, this study adds new evidence to a growing body of literature suggesting that the tone of press-originated articles contains incremental information content.