An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Henock Louis
Penn State University

Jennifer Joe
Georgia State University

Dahlia Robinson
Arizona State University

Abstract: We analyze the impact of the press on manager and investor behavior by examining how media exposure of board ineffectiveness affects corporate governance, financial reporting practices, investor trading behavior, and security prices. The results suggest that media releases of (noisy) information significantly affect the behavior of market participants. Media exposure of board ineffectiveness forces targeted firms to take corrective actions. Individual investors appear to react negatively to the media exposure whereas investment firms act as if they anticipate the targeted firms’ corrective actions. The targeted firms also experience a significant improvement in their performance following the negative media exposure.

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