A theory of financial media

Eitan Goldman, Jordan Martel and Jan Schneemeier

Journal of Financial Economics, 2022, vol. 145, issue 1, 239-258

Abstract: We present a model of media coverage of corporate announcements. Firms strategically use the media to communicate corporate announcements to a group of traders who observe announcements not directly but through media reports. Journalists strategically select which announcements to report to readers. Media coverage inadvertently incentivizes firms to manipulate the underlying announcements. In equilibrium, media coverage is tilted towards less manipulated negative news. The presence of financial journalists leads to more manipulation but makes stock prices more informative on average. We provide additional predictions regarding the media’s impact on the quality of firm announcements and stock prices.

Keywords: Financial journalism; Disclosure; Manipulation; Price quality (search for similar items in EconPapers)
JEL-codes: D82 G14 M40 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:145:y:2022:i:1:p:239-258

DOI: 10.1016/j.jfineco.2021.06.038

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