The Media and Mispricing: The Role of the Business Press in the Pricing of Accounting Information
Drake, Michael S., Guest, Nicholas M., Twedt, Brady J.
The Accounting Review · 2014 · Volume 89 · Issue 5
Abstract
This study investigates the role of the business press in the pricing of accounting information. Using a comprehensive dataset of more than 111,000earnings-relatedbusiness press articles published from 2000 to 2010, we find that press coverage of the annual earnings announcementmitigatescash flow mispricing, but has a negligible effect on accrual mispricing. We provide evidence that this impact is driven primarily by the press disseminating the information more broadly, rather than by the creation of new content that helps investors understand the implications of accounting information. Our results suggest that the business press plays an important role in facilitating the market's ability to efficiently impound accounting information into stock prices and provide new insights into the role of the business press as an information intermediary in capital markets.
Keywords
business press, accrual anomaly, cash flow anomaly, mispricing, information dissemination, information creation
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