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The Role of the Business Press as an Information Intermediary
Brian J. Bushee, The Wharton School
John E Core, The Wharton School
Wayne Guay, The Wharton School
Sophia J.W. Hamm, The Wharton School
ABSTRACT. This paper investigates whether the business press serves as an information intermediary in the capital markets. We examine the impact of the press on firms’ information environments during earnings announcements. In order to focus on firms with likely information problems and capital needs, we examine a sample of 1,246 medium-sized NASDAQ growth firms from 1993 to 2004. We collect 672,052 articles for these firms, which we classify as firm-initiated or press-initiated coverage. We find that greater press coverage increases public information about firms (measured by greater absolute returns and trading volume at the time of an earnings announcement), reduces the degree of information asymmetry (measured by lower spreads and greater depth), and facilitates more of both small and large trades.
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