Soft Information in the Financial Press and Analyst Revisions
Bradshaw, Mark T., Lock, Brandon, Wang, Xue, Zhou, Dexin
The Accounting Review · 2021 · Volume 96 · Issue 5
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. JEL Classifications:G12; G14; G24.
Keywords
media, analysts, analyst revisions, tone, soft and hard news
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