The role of bad-news coverage and media environments in crash risk around the world

Qigui Liu, Jinghua Tang, Donghui Li and Lu Xing

Journal of Empirical Finance, 2023, vol. 72, issue C, 488-509

Abstract: Employing a large international sample across 34 countries, we find that media coverage of bad news reduces firms’ future stock price crash risk. This effect is strengthened when the country-level trust in news media and press freedom is high. Bad-news coverage not only conveys price-sensitive information that directly alleviates managers’ bad-news hoarding, but also disciplines managers’ opportunistic activities, such as earnings management and risk-taking, which in turn impedes the hoarding of bad news. Furthermore, the negative effect of bad-news coverage on future crash risk intensifies during the global financial crisis and weakens following the adoption of International Financial Reporting Standards.

Keywords: Bad-news coverage; Trust in news media; Press freedom; Crash risk (search for similar items in EconPapers)
JEL-codes: G00 G15 G30 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:72:y:2023:i:c:p:488-509

DOI: 10.1016/j.jempfin.2023.04.007

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