Friends in media: Implications of media connections for analyst forecast optimism

Md Miran Hossain, Babak Mammadov and Hamid Vakilzadeh

International Review of Financial Analysis, 2024, vol. 93, issue C

Abstract: We investigate the effect of corporate executives' connections with financial media on analyst forecast optimism. Some studies document that managers use their connections to benefit the firm. Alternatively, other studies show that managers use their connections to benefit themselves at the expense of the firm. Thus, it is difficult to predict ex-ante whether executives use their media connections to enhance information efficiency or distort information environment. We propose two hypotheses on the impact of financial media connections: information efficiency and manipulation. We estimate managerial media connection by using the BoardEx database, and apply standard OLS regression, mediation analysis, propensity score matching, 2-SLS instrumental variable regressions, and difference-in-difference regressions to test the two alternate hypothesis. Consistent with the manipulation hypothesis, our results suggest that corporate executives use media connections to exacerbate analyst forecast optimism. Mediation analysis suggests that media connections are related to not only more news coverage but also more positive news sentiment. We further find that managerial incentives and board monitoring moderates the relationship between media connections and analyst forecast optimism. Our study makes several contributions to academic literature and is interesting to regulators and investors. As corporate executives tend to exploit their friendship with the media to achieve enhanced analyst forecast optimism, it would have a negative impact on the efficiency of the capital markets. Our results suggest that regulators and investors should more closely scrutinize the social ties of corporate executives.

Keywords: Analyst forecast optimism; Media; Media connections; Social networks (search for similar items in EconPapers)
JEL-codes: G14 G30 G34 M40 M41 M49 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1057521924001145
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:93:y:2024:i:c:s1057521924001145

DOI: 10.1016/j.irfa.2024.103182

Access Statistics for this article

International Review of Financial Analysis is currently edited by B.M. Lucey

More articles in International Review of Financial Analysis from Elsevier
Bibliographic data for series maintained by Catherine Liu ().