Don't talk too bad! stock market reactions to bank corporate governance news

Federico Carlini, Doriana Cucinelli, Daniele Previtali and Maria Gaia Soana

Journal of Banking & Finance, 2020, vol. 121, issue C

Abstract: This paper investigates the effect of media talk on bank stock returns in response to corporate governance news. Using Loughran and McDonald's (2011) dictionary, we create four categories of word lists that define the positive/negative tone and degree of certainty/uncertainty of news. We document three relevant findings. First, negative news significantly affects bank stock returns. Second, media coverage and the degree of certainty of the news are associated with more severe stock market losses. Third, bank capital and risk-adjusted performance mitigate the effect of negative news on stock prices. Overall, our study suggests that media talk on bank corporate governance events is an important determinant of abnormal stock returns.

Keywords: Corporate governance; Bank; News; Event study; Text analysis (search for similar items in EconPapers)
JEL-codes: G14 G21 G34 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:121:y:2020:i:c:s0378426620302247

DOI: 10.1016/j.jbankfin.2020.105962

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