mac project - business press - group2

8/8/2019 MAC Project - Business Press - Group2

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Management Accounting

Dr. Ashish Verma

Team

Abhijit Jha (01)

Abhinanda Das (02)

Ajay Sharma (09)

Gaurav Eshpuniyani (33)

Kapil Singh (43)

The Role of the Business Press as an InformationThe Role of the Business Press as an Information

IntermediaryIntermediary


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Content

Introduction & Background

Whatis Information Intermediary

Types ofInformation Intermediary

Business Press as Information Intermediary

Conclusion


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Introduction

We woulddiscuss how business press acts as anWe woulddiscuss how business press acts as an

agentthatprovides informationthatis new andagentthatprovides informationthatis new and

usefulto other interested parties, either because itusefulto other interested parties, either because it

has notpreviously beenpublicly releasedor becausehas notpreviously beenpublicly releasedor because

ithas notbeen widelyithas notbeen widely circulatedcirculated


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Role ofBusiness Press Key Studies

Notjust a repeater ofinformation, but rather creates

originalinformation

Press acts as a Watchdogfor Account Fraud

Corporations cannot undermine Press and mustmaintaingood relations with Press

When we look atthe press as a whole, because there

are so many reporters and so many outlets, itdoes

not appear that advertising money biases coverage

Source: Press as AccountingWatchdog by Gregory S. Miller, HBS Professor with expertise in Financial

Communication


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Role ofBusiness Press key studies

the broadest and most widely disseminatedofall

potentialinformationintermediaries,

reachingboth sophisticated and unsophisticated

investo

rs, as well as managers, regulato

rs, ando

thermarketparticipants


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Types ofInformation Intermediary

FinancialAnalysts

Institutional Investors

Media

Business Press Firm Initiated Press Release

JournalArticles


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Information Events

Earnings Disclosures (Quarterly and Yearly Results)

Major Government Events Financial Budgets,

Election, New Govt, others

Industry EnvironmentChanges Mergers & Acquisitions

Company Events ManagementChange, IPOs


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Prior Literature and Empirical Predictions

Business press plays informational role aroundfirms earningsannouncementin multiple ways.

Facilitates disseminationofthe firms earning release and alsoinformation regarding scheduledfirm disclosure .

Press gathers info

rmationfo

rm multiple so

urces and updates repo

rtsofanalystforecast ,price ,managementforecast and Hot stocks.

Press solicits quotes from management and analysts ofthe Earningrelease andinterpretthe informationinthe contextofinformationIndustry

Allthe abo

ve points discussed suggestthe presss p

otentialt

oincrease informationflow and reduce asymmetry across

investors


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Prior Literature and conclusions

Thisjournal also referredtoprevious researchers regarding

role ofthe press inprovidinginformationtofirms investors ,

creditors .

Observed abnormal returns and volume around earnings

announcements are greater whenfirms provide more wordsintheir earnings press release.

Further, observed that a greater number ofwords inthe

press release is associated with lower bid-ask spreads and

greater marketdepth.

Accuracy ofanalysts forecasts is greater for firms withhigher

levels ofcoverage inthe Wall Street Journal.


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The Prediction

Maintests focus onthe influence ofthe press oninformation asymmetryamonginvestors. press coverage disseminates informationto a broadgroupoftraders who wouldnototherwise have the information, it willreduce the information advantage ofthe informedtraders, therebyloweringinformation asymmetry. Press willhave a bigger impactoninformation asymmetry thanthe provisionofnew reporter-generated

information.

We use bid-ask spreads anddepth to capture the price and quantitydimensions ofinformation asymmetry. We predictthat greater presscoverage ofthe earnings announcement, especially through broaderdissemination and more packagingofinformation, lowers bid-ask spreadsandincreases marketdepths duringthe earnings announcementperiod.


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Sample Selection and Variable Measurement

Obtaindata onpress articles between 1993 and 2004 from the Factivadatabase.

First, we restrictour sample to NASDAQfirms, which are generallysmaller andless followedby analysts than NYSE firms.

Second, we require thatfirms be publicly tradedduring 1998. We selectthis date because intensive Factiva coverage begins around 1993,providing us with six years ofpotential coverage before and after 1998.

Selected 50% ofthe sample withthe highest market-to-book assetsratios.

Finally, we merge the Factiva data withthe CRSP, Compustat, and TAQ

data.


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Sample Selection and Variable Measurement

We matchthe articles publicationdates withtrading

dates, either inthe firms earnings announcement

windows or inpre-earnings announcement windows.

When an article occurs on a nontradingday

(Saturday, Sunday, or holiday), we assignittothe

nexttradingday. Our final sample consists of

600,478 press articles for 27,987 firm-quarter

observations, representing 1,182 firms.


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Exceptions

Other than some caveats like sample ofmid-sized NASDAQfirms that are more likely tohave weak public informationenvironments. results may notbe generalizable to samples oflarge firms with a richinformation environmentor small,neglectedfirms.

Focus ofour study around earnings announcementperiods,which contain a predictable news release and cover a short-window. Itis possible thatthe effectofthe press couldbedifferentinless predictable contexts, such as a mergerannouncementor a change in management


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Conclusion

We find strong and consistent evidence thatthe press is an

independentinformationintermediary and animportant

factor in reducinginformationproblems relatedto earnings

announcements.

Finally, the factthatthe press has the potentialtoprovide such

as beneficial role in shapingfirms information environments

motivates future work examininghow corporate managers

can actto improve the timeliness andbreadthof

disseminationoftheir disclosures by the press.


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Thank You!

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