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Market Reaction to Corporate Press Releases

Andreas Neuhierl · Anna D. Scherbina · Bernd Schlusche

131 citations0/0 files storedJournal of Financial and Quantitative Analysis

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Financial Markets and Investment Strategies Corporate Finance and Governance Financial Analysis and Corporate Governance

Abstract

Abstract We classify a unique and comprehensive data set of corporate press releases into topics and study the market reaction to various types of news. While confirming prior findings regarding strong stock price responses to financial news, we also document significant reactions to news about corporate strategy, customers and partners, products and services, management changes, and legal developments. Consistent with regulators' expectations, the level of informational asymmetry in the market declines following most types of press releases. At the same time, return volatility frequently increases in the post-announcement period, which we show can be attributed to higher levels of valuation uncertainty.

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References

1984Corporate financing and investment decisions when firms have information that investors do not have 1985Continuous Auctions and Insider Trading 1993The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems 1984The Capital Structure Puzzle 1985Bid, ask and transaction prices in a specialist market with heterogeneously informed traders 1987A Simple Model of Capital Market Equilibrium with Incomplete Information 1998Investor Psychology and Security Market Under‐ and Overreactions 2007Giving Content to Investor Sentiment: The Role of Media in the Stock Market

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2015How Does the Stock Market Absorb Shocks?2014Information Transmission in Finance 2015Media-expressed negative tone and firm-level stock returns 2020The Role of Private Disclosures in Markets with Weak Institutions: Evidence from Market Liberalization in China 2020To Advocate or Not to Advocate: Determinants and Financial Consequences of CEO Activism

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